CHAPTER III

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From the End of the First Cycle of American Influences to the Present Day, 1660-1894

Up to the close of the eighteenth century the production of silver shows a remarkable steadiness and uniformity—the decrease on the yield of the Potosi mines being compensated by the increased output of Mexican silver. In the condition of the output of gold, however, there is a perceptible alteration, due to the increasing imports of that metal from Brazil. The change in the relative production of the two metals appears from the table on p. 155.

The effect on the ratio of this increased relative and absolute amount of gold was, however, considerably diminished by the increasing favour with which gold came to be regarded for currency purposes, from the end of the seventeenth century onwards. In general terms this process or tendency in favour of gold continued through the first sixty years of the eighteenth century, at which time the proportion of gold to the production of the two metals had risen as high as 40 per cent., whereas in 1600 it had only formed 17.2 per cent. of the total.

PRODUCTION OF THE PRECIOUS METALS, 1660-1893

From 1760, however, such relative preponderance of gold was not maintained. It gradually sank back until, by the beginning of the present century, it had come to form only a little over 23 per cent. of the total. From 1820 to 1840 a recovery took place, but it was not until the Californian gold discoveries that the second great disturbance in the relative production of gold and silver took place; such a disturbance, i.e., as can be fitly compared with that which the sixteenth century witnessed.

Period. Annual Production of Gold. Annual Production of Silver. Percentage of Gold to Total. Percentage of Silver to Total.
1661-1680 £1,291,750 £3,134,150 29.2 70.7
1681-1700 1,501,700 3,179,650 31.1 67.9
1701-1720 1,788,400 3,253,750 35.5 64.5
1721-1740 2,661,650 3,988,600 40.0 60.0
1741-1760 3,433,100 5,038,200 40.5 59.5
1761-1780 2,888,350 6,201,550 31.8 68.2
1781-1800 2,481,700 8,131,300 23.4 76.6
1801-1810 2,480,000 8,002,650 23.7 76.3
1811-1820 1,596,100 4,966,950 24.7 75.3
1821-1830 1,983 150 4,075,950 32.4 67.6
1831-1840 2,830,300 5,278,600 34.5 65.5
1841-1850 7,638,800 6,867,650 52.1 47.9
1851-1855 27,815,400 8,019,350 77.6 22.4
1856-1860 28,149,950 8,235,950 77.4 22.6
1861-1865 25,816,300 9,965,400 72.1 27.9
1866-1870 27,256,950 11,984,800 69.4 30.6
1871-1875 24,250,000 17,250,000 58.5 41.5
1876 23,150,000 18,250,000 55.9 44.1
1877 25,050,000 19,350,000 56.4 43.6
1878 25,950,000 19,750,000 56.8 43.2
1879 23,350,000 19,050,000 55.1 44.9
1880 22,800,000 19,100,000 54.4 45.6
1881 22,450,000 19,800,000 53.1 46.9
1882 21,450,000 20,900,000 50.7 49.3
1883 20,750,000 20,800,000 49.9 50.1
1884 21,750,000 21,850,000 49.9 50.1
1885 21,750,000 21,850,000 49.9 50.1
1886 22,450,000 20,300,000 52.5 47.5
1887 22,050,000 21,950,000 50.1 49.9
1888 22,950,000 23,850,000 49.0 51.0
1889 24,600,000 26,750,000 47.9 52.1
1890 24,360,000 26,620,000 47.8 52.2
1891 29,000,000 36,567,629 42.4 57.6
1892 30,164,536 40,668,247 42.5 57.5
1893 32,066,591 42,963,027 42.7 57.3[D]

[D] The figures for the last three years are taken from the Report of the Hon. R.E. Preston, director of the United States Mint, 1893 (Report on the Production of the Precious Metals, pp. 274-5). See ibid. for a most carefully compiled table of the production of the precious metals from 1493 to 1893, differing from the above in material details.

As far as this relative production is concerned, the period, 1660-1840, is one of gradual and not abnormal variation, neither small nor inconsiderable in effect, but certainly not revolution-working, as had been the case in the sixteenth century with American silver, and as was to be in the nineteenth century with Californian and Australian gold, and in our own days with American silver for the second time.

With regard to the absolute production—gold shows a rise up to 1760, then a steady decline to 1820, followed by a second rise up to 1840. In the case of silver the decline in the absolute amount was steady from 1600 to 1680, then ensued a steady and strong rise to 1800, followed by an abrupt drop in the second decade of the present century, and then by a strong and steady recovery, commencing from 1830 and continuing until the present.

WIDE EFFECT OF MINT LAWS

The larger question of the relative distribution of this mass of precious metals depends for its determination upon a full understanding of the law of the various Mints. Speaking in large, during the eighteenth century the Mint ratio was in favour of silver in France, and her currency was almost entirely silver throughout the century; conversely the Mints favoured gold in England and Spain, and gold was almost the only constituent of the currency of either country for the greater part of the century. There can be little doubt that these simple facts had a great influence in actually determining the great currency legislation which closed the century and finally decided England in favour of gold, and France and the United States in favour of a bimetallism strongly favouring silver.

The statement of the ratio is as follows:—

South-West Germany.
1657-80 15.10
Netherlands.
1663 14.43
England.
1663 14.48
1690 15.39
1715 15.21
France.
1679 14.91

COMMERCIAL STATEMENT OF THE RATIO (FROM 1687-1832, FROM THE HAMBURG EXCHANGE RATIO; FROM 1833 ONWARDS, FROM THE LONDON BULLION BROKERS' RATIO).
1687-8 14.94
1689-90 15.02
1691 14.98
1692 14.92
1693 14.83
1694 14.87
1695 15.02
1696 15.00
1697 15.20
1698 15.07
1699 14.94
1700 14.81
1701 15.07
1702 15.52
1703 15.17
1704 15.22
1705 15.11
1706 15.27
1707 15.44
1708 15.41
1709 15.31
1710 15.22
1711 15.29
1712 15.31
1713 15.24
1714 15.13
1715 15.11
1716 15.09
1717 15.13
1718 15.11
1719 15.09
1720 15.04
1721 15.05
1722 15.17
1723 15.20
1724-25 15.11
1726 15.15
1727 15.24
1728 15.11
1729 14.92
1730 14.81
1731 14.94
1732 15.09
1733 15.18
1734 15.39
1735 15.41
1736 15.18
1737 15.02
1738-9 14.91
1740 14.94
1741 14.92
1742-3 14.85
1744 14.87
1745 14.98
1746 15.13
1747 15.26
1748 15.11
1749 14.80
1750 14.55
1751 14.39
1752-3 14.54
1754 14.48
1755 14.68
1756 14.94
1757 14.87
1758 14.85
1759 14.15
1760 14.14
1761 14.54
1762 15.27
1763 14.99
1764 14.70
1765 14.83
1766 14.80
1767 14.85
1768 14.80
1769 14.72
1770 14.62
1771 14.66
1772 14.52
1773-4 14.62
1775 14.72
1776 14.55
1777 14.54
1778 14.68
1779 14.80
1780 14.72
1781 14.78
1782 14.42
1783 14.48
1784 14.70
1785 14.92
1786 14.96
1787 14.92
1788 14.65
1789 14.75
1790 15.04
1791 15.05
1792 15.17
1793 15.00
1794 15.37
1795 15.55
1796 15.65
1797 15.41
1798 15.59
1799 15.74
1800 15.68
1801 15.46
1802 15.26
1803-4 15.41
1805 15.79
1806 15.52
1807 15.43
1808 16.08
1809 15.96
1810 15.77
1811 15.53
1812 16.11
1813 16.25
1814 15.04
1815 15.26
1816 15.28
1817 15.11
1818 15.35
1819 15.33
1820 15.62
1821 15.95
1822 15.80
1823 15.84
1824 15.82
1825 15.70
1826 15.76
1827 15.74
1828-9 15.78
1830 15.82
1831 15.72
1832 15.73

STATEMENT OF THE RATIO, 1660-1893
Year. Price of Silver Pence per Oz. Ratio. Year. Price of Silver Pence per Oz. Ratio.
1833 59 3/16 15.93 1864 61 3/8 15.37
1834 59 15/16 15.73 1865 61 1/16 15.44
1835 59 11/16 15.80 1866 61 1/8 15.43
1836 60 15.72 1867 60 9/16 15.57
1837 59 9/16 15.83 1868 60 1/2 15.59
1838 59 1/2 15.85 1869 60 7/16 15.60
1839-40 60 3/8 15.62 1870 60 9/16 15.57
1841 60 1/16 15.70 1871 60 8/16 15.57
1842 59 7/16 15.87 1872 60 1/4 15.65
1843 59 3/16 15.93 1873 59 1/4 15.92
1844 59 1/2 15.85 1874 58 5/16 16.17
1845 59 1/4 15.92 1875 56 3/4 16.62
1846 59 5/16 15.90 1876 53 1/16 17.77
1847 59 11/16 15.80 1877 54 3/4 17.22
1848 59 1/2 15.85 1878 52 5/8 17.92
1849 59 3/4 15.78 1879 51 1/4 18.39
1850 60 1/16 15.70 1880 52 1/4 18.04
1851 61 15.46 1881 51 11/16 18.24
1852 60 1/2 15.59 1882 51 5/8 18.25
1853 61 1/2 15.33 1883 50 9/16 18.65
1854 61 1/2 15.33 1884 50 5/8 18.63
1855 61 5/16 15.38 1885 48 5/8 19.39
1856 61 5/16 15.38 1886 45 3/8 20.73
1857 61 3/4 15.27 1887 44 5/8 21.13
1858 61 5/16 15.38 1888 42 7/8 21.99
1859 62 1/16 15.19 1889 42 11/16 22.09
1860 61 11/16 15.29 1890 47 11/16 19.17
1861 60 13/16 15.26 1891 45 1/16 20.92
1862 61 7/16 15.35 1892 39 3/4 23.74
1863 61 3/8 15.37 1893 35 9/16 26.49

Up to 1878 this table is derived from Soetbeer, Edelmetall-Produktion, pp. 130-2. From 1878-1890 I have calculated simply in accordance with Soetbeer's method.

The figures for 1891-3 are taken from the United States Mint Report, 1893, already referred to, p. 251. In the table there printed the director of the Mint gives slightly different figures for several years from 1872 onwards.

As far as the conditions of production of the precious metals are concerned, and the connection between those conditions and the ratio, there is historic and understandable continuity between the period already passed in review and modern times. In the method of expressing that ratio, however, there is a remarkable difference.

EVOLUTION OF THE MODERN SYSTEM

With the close of the seventeenth century the advantage of the process of altering the denomination of the coinage, of diminishing the content and reducing the standard of fineness, began to be impugned on theoretic grounds, and in the course of the eighteenth century that process itself fell into disuse. Since that time no Mint or legislative change such as we have hitherto described was made on the expressed value or content of any European coinage. Bearing in mind the twofold importance which was attached to that process of legislative guarding of the currency, this change must be regarded as of vital import. The legislator, from the middle of the fourteenth century, had attempted two things by this mechanism—(1) to follow the general rise of prices, and meet it by reducing the contents of the coins in such proportion as he thought fit; (2) to prevent any disastrous outflow of the precious metals by altering the ratio. The control of the Mint rates of metal-purchase and metal-coinage was, therefore, a matter of importance financially and politically to the nation, and economically to international commerce. In just such measure, therefore, was the entire ceasing of this State control of the mechanism of international exchange and currency a matter of almost incalculable significance in the history of the European monetary system. In the domain of finance it effected a revolution as signal as that produced in the relations of labour to capital by the disuse of the old labour laws. The ceasing of the artificial arbitrary Mint rates made way for a naturally determined or commercial ratio, and the regulation of the international flow of the precious metals was left to the oscillation of trade balances, and to the action of interest rates and discount. The change is one from a mediÆval, State-bound, merely legislative system to the modern system, in which the flow of precious metals is determined by the perfectly natural and automatic action of international trade—is indeed the index and safety-valve of it, and of the whole present commercial world-circle.

This was not merely a change of fact and practice, it was a revolution of theory.

For before the old State belief in the necessity of safeguarding the supply of precious metals at any cost and consideration could go by the board, the whole Mercantile Theory must have lost its force in men's minds.

In the domain of theory the transition from the Mercantile to the modern system was gradual, through the various intermediate steps of Physiocratic and Smithian economics, and the complete abandonment of that system for our own can only be put very late, if indeed its period can at all yet be written, for modern Protectionist ideas are only a lusty survival of it. In the domain of financial practice, however, it—the mercantile system—ceased from the moment that the Governments of Europe left their Mint rates stationary, and gave the flow of the precious metals and the declaration of the ratio to the free unhampered natural action of international trade. The steps of the completed process can hardly be detailed, for there was much fear attending it, and the various Governments frequently retraced their steps in uncertainty. The earliest direct enactment was made by England. By the Act of 15 Charles II., chap. 7, sect. 12 (1663), the statutes forbidding the exportation of bullion were removed at one blow of astounding boldness. "Forasmuch," says this Act, "as several considerable and advantageous trades cannot be conveniently driven and carried on without the species of money or bullion, and that it is found by experience that they are carried in greatest abundance (as to a common market) to such places as give free liberty for exporting the same, and the better to keep in and increase the current coin of this kingdom, be it enacted that from and after the 1st day of August 1663 it shall and may be lawful to and for any person or persons whatsoever to export out of any port of England and Wales in which there is a customer or collector, or out of the town of Berwick, all sorts of foreign coin or bullion of gold or silver, first making an entry thereof in such customhouse respectively, without paying any duty, custom, poundage, or fee for the same, any law, statute, or usage to the contrary notwithstanding."

FREE TRADE IN THE PRECIOUS METALS

Standing so early and so almost completely alone as it does, this Act evinces an unexampled prescience and boldness. It doubtless reflects the commercial traditions of Holland, but that it should have been at a single stroke transferred to England at a time when she was so economically different and distant from Holland, needs make us pause in admiration. The only parallel to it, if any, would arise if France should suddenly, and by a single enactment, adopt to the full the Free Trade policy of England. As a matter of fact this Act of 1663 proved itself for a long time, and through many oscillations, impossible of execution, and far into the eighteenth century the British Government meddled, by legislation and proclamation, with the export of the precious metals, and with the tariff of the coins, as will be seen immediately. It was not till 1780 that a similar Act was passed for Ireland.

In 1803 the Lords of the Treasury were by statute authorised to grant licences for the exportation of silver bullion without any such certificate or document whatsoever as had been required by the statute of 6 and 7 Wm. III. c. 17, sect. 5.

It was almost a century after this action of England that France followed in the same path. By a proclamation of 7th October 1755, permission was given to the free commerce in precious metals and in foreign monies. But in the case of France, as in that of England, the enactment was not immediately nor fully realisable. The exportation of the national specie was still forbidden, and more than once the State found itself obliged to return to the question of the tariffing of its coinage.

It is this vacillation—a vacillation, however, which must in every instance be attributed to sheer State necessity—which makes it impossible to trace in detail and point by point the fall of so much of the Mercantile System as concerned the regulating of international movements of metals. The practice of the commercial world was doubtless in advance of the legislator's standpoint, as indicated by such detached references, and was effectual in completing the revolution silently and under the surface, whether by the aid or in spite of laws and proclamations. The same had been the case, e.g., with the old usury laws.

When effected there are two highly important results which stand as the outcome of this change in the theory of international commerce.

1. The perception of a right theory of international balances opened the way to the separation of finance or currency phenomena pure and simple, and so prepared the ground for a scientific conception and treatment of them. In one direction this treatment resulted in the evolution of a theory and practice of a monometallic system—one, i.e., in which a single metal was made the legal tender, and a second or third metal bound to it in a hard-and-fast, subordinate relationship, so that they could not by their oscillations injuriously affect the tenderable metal. In another direction the same scientific conception and treatment resulted in the evolution (and after a time the practice) of a bimetallic theory. Modern currency history hinges on the antagonism of these two systems.

FUNCTION OF DISCOUNTS IN MODERN SYSTEM

This statement of the case will serve to show the enormous difference between nineteenth-century currency situations and problems and those of mediÆval and seventeenth-century Europe. To-day the point at issue is between definitely and scientifically conceived rival theories, and the practical difficulty before the world is how to provide, not so much a permanent ratio, as a permanent rate of international settlement between countries using different monetary systems, between silver-using and gold-using countries. In the seventeenth century there was no conception of theory at all, and the practical difficulty was how to frustrate the operations of the bullionist and arbitragist and politicians, and the depletion of national treasure due to their activity, and based on a difference of ratio prevailing in different countries.

2. The second practical outcome of the revolution was the development of the modern system of control of the flow of gold balances, viz. by means of the bank rate and the arbitrage transactions depending thereon, and on interest and discount rates generally.

The modern theory of international trade does not say that between two particular countries, or at any one particular point of time there is an equivalence of exchange, but that between a circle of commercially interconnected countries, and over a certain cycle of time or operations, there is an equivalence of exchange of goods and services. Movements of currency in the most elementary form assist the process, as far as immediate settlements are concerned; bills of exchange assist it when there is need of deferred payments, as, for instance, when a country imports steadily all the year round, but has only one export time, say after harvest; and, finally, bank and discount rates assist the process by providing currency media at times and places which would otherwise be unable to attract a supply. Over the whole circle of completed operations there is equilibrium of exchange, and the machinery by which that equilibrium is accomplished is currency in the widest sense. The index or indicator and safety-valve of the whole is the rate of interest. On these bank rates are based the operations of the modern bullion dealers or arbitragists, which serve to equalise or economise the distribution of the precious metals all over the world.

It will be seen at a glance, therefore, that they fulfil, in an automatic and perfectly natural manner, all that was vainly attempted to be accomplished by the repressive savage action of the State, and the interfering unscientific handling of the Mint and coinage rates. It is in this feature that the great distinction between the modern and the seventeenth-century world consists. Such a difference can only be based upon, and have arisen from, a true theory of international trade. But the process of development which alone made it possible—the development of modern banking, the invention of paper currency media, the breaking down of international trade restrictions, all the mechanical and scientific inventions which have resulted in the binding of the world together in one whole as far as commerce is concerned,—all this would comprise in brief the essential features of the complete commercial development of two centuries or more, and how far they are related as cause or effect it would be hard to say.

In this secondary period, therefore, the separate history of each individual state gradually loses its distinct or isolated importance, as far as mere Mint edicts are concerned. As a consequence the bimetallic action which we have hitherto sought in the history of each individual currency must now increasingly be sought in the wider field of the world currency, that congeries or completed whole of currency of which each national system now forms only a part, and that not an independent part.

France.

In this third period the first change which France made in her silver monies was in 1674, when she for a time coined 4-sol. pieces of a quality below that of the Écus blancs by more than a fifth. A great outcry was made by the Mint officers and mercantile community against this money as implying a debasement.

In 1679 there was a noticeable quantity of Spanish pistoles and large Écus d'or in circulation, and as a remedy it was ordered that they should be recoined into louis d'or and louis d'argent, the King offering to forego the seignorage as an inducement to bring them to the Mint. In 1686, however, the louis d'or itself was raised from 10 livres to 11 livres 10 sols., and the ratio thus changed to 15 1/2. This being found greatly in excess, in the following year it was lowered to 11 livres 5 sols. (a ratio of 15 1/4). In 1689 both silver and gold were again raised, the louis d'or to 11 livres 12 sols. and the louis d'argent to 3 livres 2 sols., but almost immediately a general recoinage was resolved upon. In this great operation, effected towards the close of 1689, the weight and standard of the previous coinage was exactly retained, but the louis d'or was issued at 12 livres 10 sols. and the louis d'argent at 3 livres 6 sols. Only two years later again the standard had to be altered, and the value of 1693 somewhat raised. It will give some slight idea of the sapping of the coinage that the pieces which in 1691 were minted at 12 livres 10 sols. were, in 1693, called in at a valuation of 11 livres 14 sols. The new species of 1693 were issued at 13 livres and 3 livres 8 sols. respectively.

Ten years later a third recoinage was ordered, the louis d'or being issued at 15 livres, and the louis d'argent at 4 livres. By 1709 these species had sunk in equivalence to 12 livres 15 sols. and 3 livres 8 sols. respectively. In that same year, however, their issue value was raised to 20 livres and 5 livres. This extraordinary and arbitrary action was greatly to the detriment of French commerce, and the idea was entertained of gradually reinducing the standard of 14 livres and 3 livres 10 sols. This was ordered by proclamation of 30th September 1713, which was to continue in force till 1715. In the latter year a reformation of the coinage was again undertaken, the reformed species rising to 20 livres and 5 livres, and the worn species remaining at 16 livres and 4 livres. From this latter date up to 1721 the operations of the financier John Law wrought great disasters in the monies. At the time of the erection of the bank, 2nd May 1716, there were four species of louis d'or and three of louis d'argent. By 1720 the former had grown to forty in number and the latter to ten. (For the disorders of the period of John Law, see the account of French monetary system, Appendix VI.) It was to remedy this disorder that the great edict of 1726 was enacted. This edict, which formed the basis of the French currency system almost up to the days of the Revolution, prescribed the minting of louis d'or at a tale of 30 to the mark, and issued at a value of 20 livres; and of silver Écus at 8 3/10 to the mark and issued at 5 livres—divisional coins in proportion. The legal ratio was therefore 14 5/8. All foreign coins and the ancient species of gold and silver were decried, and ordered to be brought in for reminting. All the prohibitive regulations of an old rÉgime against cutting and export, etc., were re-enacted with severest penalties. But as the rate at which the Mint was ordered to take in the old coinage did not represent the commercial value at the moment, the old coins were not brought in, and up to as late as 1749 the recoinage had not been accomplished, although the Mint prices had been at different times advanced on the whole a matter of 30 per cent. or more. In 1759 the want of currency had become so great that the King sent his plate to the Mint, and numbers of private individuals followed his example, receiving in reimbursement part payment at the rate of 861 livres 5 sols. 10 den. for the mark of fine gold, and of 59 livres 5 sols. 10 den. for the mark of fine silver.

This latter tariff underwent no change until 1771, when, under the pretext of the changes which foreign coinage tariffs had undergone, those terms were fixed respectively at 709 livres and 48 livres 9 sols.

In this rÉsumÉ the mention of billon money has been generally avoided, as unduly complicating the subject. But in the legislative action of France in the eighteenth century there is one act which necessitates a momentary departure from this standpoint.

In 1738 the Government of the United Provinces diminished the value of their sols. by one-half. The French Government fearing that this diminution would lead to an immense influx of such sols. decided to follow suit. By a decree of August 1st of the same year, 1738, it was ordered that the Douzains and pieces of thirty deniers should have course only for eighteen deniers. The important point to notice in connection with this is that, in order to mitigate the effect of this reduction, the same decree limited the tender of such billon money. It was ordered that in payments up to 400 livres not more than 10 livres should be tenderable in billon, and for payments of more than 400 livres not more than 1/40 of the total. The restriction was ineffectual in preventing either the import of foreign billon specie or the operations of billonage or arbitrage, based on the differentiated value of the various kinds of billon circulating. This is quite evident from the preamble of the edict of the following October, 1738, which attempted the calling in of the 30-denier pieces, in order to put a stop to the process.

FRANCE: THE REFORM OF 1785

Such a failure is quite in keeping with all previous experience as recorded in these pages, and deserves no special reference. The point to note is rather the gradual evolution and adoption of the idea of limiting the tender of the lower species, so as to contract their action on the main species of the currency. This idea forms the complement of the idea of an agio, involved in the issue of fractional coins on a lower standard or basis than that of the greater specie. The one idea was—in long, over-long, periods i.e.—impracticable without the other; but together, when finally evolved, thoroughly seized and put in practice, they formed the main basis of the truest modern currency system.

To return to the pure gold and silver species. The basis of 1726 remained at law unaltered until 1785. The edict of the 30th October of that year commanded a recoinage; no change was made in the silver coinage, which remained according to the tariff of May 1773, namely, 52 livres 9 sols. 2 den. to the mark fine. By the alteration of the tariff of gold, however, to 828 livres 12 sols. to the mark fine, the ratio of 14 5/8, which had nominally prevailed since 1726, was altered to the memorable 15 1/2. The reason was explicitly stated to be the increase in the value of gold during several preceding years—an increase which had banished or detained gold from the French Mint and even from France.

Writing in 1785, the minister, Calonne, who proposed and executed the recoinage in that year, spoke thus:—

"In 1726 the legal ratio was fixed in France at 14 marks 5 oz. of silver, to a mark of gold, and that which proves with how much sagacity this point was seized is the fact that during a long course of years France retained in her circulating medium a sufficiently large proportion of each metal. Nevertheless, her gold gradually became less common, and for some years this scarcity has rapidly increased, and this precisely because its legal value has always remained the same, while its metallic value has increased from year to year."

He estimated the amount of livres in louis d'or existing in the country at the time of the recoinage, 1785, as 650 million livres, which amounted to only a half of the total coinage (1300 million livres) of the period 1726-85. What seems to have determined Calonne to adopt 15 1/2 was the fact that Spain had the legal ratio of 16, and that there was a probability that, in future, gold would rise in value. As for the market price, he admits that it was only 15.08-15.12 in 1785. The recoinage, therefore, brought a profit of 7,255,216 livres to the King's purse, and a profit of 21,600,000 livres to the holders of the old louis d'or.

FRANCE: CALONNE'S POLICY IN 1785

His policy was severely criticised in a report made in 1790 to the National Assembly, which proposed a silver standard, with an authorised circulation of gold coins at the ratio of 14 7/9 and the abolition of seigniorage. It is well known that this was nearer to the market rate. Calonne's ratio, therefore, must be regarded as arbitrary and designing. Practically, the latter recommendation of the committee's paper of 1790 had been conceded in the decree of 30th October 1785, as the seigniorage was by it allowed to be no more than the net cost of reminting.

By this celebrated edict of Calonne's, which also enacted a recoinage, the right of seigniorage was practically finally relinquished for France. Fixity was given to silver as the principal money, and a definite ratio was established at which gold was to circulate by its side. In these, its chief points or characteristics, it formed the exact model for the later Act of Republican France, which is ignorantly looked upon as having created the bimetallic system. The Act of 7 Germinal an XI. did but re-enact and perpetuate the edict of 1785.

It is important to reaffirm and emphasise this point, as quite wild and blind estimates have been formed of the later action of Republican France. In merest fact, that later action created no new order, it instituted no new idea, it did not even promulgate its own theory.

FRANCE: CURRENCY LEGISLATION AT REVOLUTION

Republican France began her reform of the currency in a very temporary and opportunist manner by issuing a mass of inferior monies of 15 and 30 sous pieces to form the basis of the assignats, and to replace the gold and silver which had almost entirely disappeared from circulation. In the decree of 16 VendÉmiÈre an II. (7th October 1793), however, the question of standard was approached, and decided in a remarkable manner. The monetary unit was decreed to consist of the hundredth part of a kilogram, named grave, represented (1) by a piece of silver 9/10 fine and weighing 10 grms., (2) by a piece of gold of the same weight and standard, to be current at 15 times the value of the silver piece.

This decree remained a dead letter, and two years later the franc was definitively adopted as the base of the French system. As determined by the two laws of 28 Thermidor an III. (15th August 1795), that system was based upon the silver franc (weighing 5 grms. 9/10 fine). A gold coinage was ordained, of the same fineness, in a piece of 10 grms. weight, but the ratio of value of the gold to the unit franc was not fixed. This was exactly the monetary system which Mirabeau had counselled in his memoirs to the Assembly in 1790. The silver 5-franc pieces prescribed under this system found acceptance, the bronze pieces were refused and had to be withdrawn, and as to the gold piece, its issue was not even attempted. Two years later the "Directoire" pronounced in favour of maintaining the 10-grm. piece of gold, but demanded the fixation of its value, proposing a ratio of 16:1. In opposition to this scheme, Prieur submitted to the "Council of the Five Hundred" a project adopting the silver and gold coinage, as already determined as above, but leaving the value of the gold piece to fluctuate according to the market, its value being declared twice annually by public announcement. After being materially altered in the "Council of the Five Hundred," this scheme was definitively rejected by the "Council of Senators," and for several years the question of the monetary system of the Republic was allowed to slumber. When, in the year X., the consideration of the subject was resumed, it was at the instigation of the Consuls. At their desire the Minister of Finance, Gaudin, laid before the Council of State a scheme in which he proposed the issue of 20 and 40-franc gold pieces, of a value based on the ratio enunciated in the edict of 1785, namely, 15 1/2. He was, at the same time, careful to explain that silver remained the basis of the currency, and that the gold money could be reissued if a different market compelled a change in the ratio. In his report to the Consuls, Gaudin admits that the commercial ratio had for a long time been under 15. The decisive point which led him to maintain the ratio established in 1785 was, that to change the status quo by the adoption of 15 as a ratio would occasion great loss to the holder of gold coins, and that there was no sufficient reason for so great a change.

The Financial Committee of the Council of State at first rejected the scheme, preferring that of Prieur, already described, but on an inquest, ordered by the First Consul, who insisted on pressing the matter to a conclusion, M. Gaudin carried his propositions through the Council of State, but with the important difference that the reference to any future change in the ratio of gold to the basis of silver was tacitly dropped. These propositions became the foundation of the law of 7-17 Germinal an XI. (28th March 1803), on which the monetary system of Republican France was finally built.

The exposÉ des motifs of this law speaks of the gold coins in these words:—

"The gold pieces up to the present in circulation are the pieces of 24 and 48 livres tournois. Article 6 of this law substitutes in their place pieces of 20 and 40 francs. The adoption of the decimal system necessitates this change, which brings all parts of the system into accord. It is on the same consideration that the standard is fixed at 9/10, like that of silver."

Not a word is said as to the ratio, and much more stress is laid upon the suppression of billon money and on the abolition of seigniorage, as of greater importance and benefit to the nation's interests. By this law of Germinal XI. the monetary unit of the French system was declared to be the silver franc, weighing 5 grms. of 9/10 standard. By the side of this franc and its multiples, were to be issued gold pieces of 20 and 40 francs, valued on a basis ratio of 15 1/2 to the silver.

FRANCE: THE REFORM OF 1803

It will be seen at a glance from the course of this previous history that this law instituted no new principle, or theory, or system in French currency. The decimal system was adopted in place of the old system of livres tournois, seigniorage was abolished, and fixation of value given to the unit money, and billon money discontinued. But in matter of standard and system there was not even innovation. The system of Republican France, as established by this law, was no more and no less bimetallic than in 1785, or than in 1610, or in the days of Francis I. Theories as such did not occupy the mind of the legislator, and of any conception of a bimetallic theory or system such as we have learned to know there is no trace. The First Consul found at hand the two metals which had formed the currency of his country for centuries. The problem of their regulation was the same which had been faced by his predecessors for centuries, and he settled it in the same practical untheoretic way.

It was only gradually that in its totality of coins the French monetary system was made to conform to the metric system thus established. The old gold coins of 12, 24, and 48 livres were not suppressed until June 1829, the actual extinction of billon money was only accomplished in 1845, and the recoinage of the inferior monies in 1852-56. But such are mere matters of detail and apart from the subject.

The experience of France under this new rÉgime is, therefore, in no wise different in kind> from such experience as has been described for the preceding centuries. It is not until the broaching of a bimetallic theory as such, and until the expression of that theory, as a theory, in the formation of the Latin Union, that anything like a special significance attaches to the monetary system and experience of France in the nineteenth century, any more, e.g., than in the seventeenth. The main difference in the situation was not that France had changed her system, and that her experience was henceforth different and of different signification, but that England had changed hers, and that the brunt of the fluctuations of the precious metals about a fixed ratio was left to be borne by a smaller area. The influence and the instance is, therefore, more telling in degree, but in no way different in kind.

The second idea which is commonly entertained with regard to the action of France during this later period, viz. that her action secured for the world at large a fixed and steady ratio, is equally—indeed, still more—fallacious. At no point of time during the present century has the actual market ratio, dependent on the commercial value of silver, corresponded with the French ratio of 15 1/2, and at no point of time has France been free from the disastrous influence of that want of correspondence between the legal and the commercial ratio. The opposite notion, which prevails and finds expression in the ephemeral bimetallic literature of to-day, is simply due to ignorance. From 1815 England has been withdrawn from this action of a bimetallic law, and the modern insular pamphleteer has before his eyes no sign of its workings in his own country. He therefore assumes an universality of such experience, and attributes it to the French legislative ratio. It is in no polemic spirit, but simply in the interest of science that this particular misapplication of history to the squaring of a theory is to be branded. The plainest facts of history are thereby absolutely misrepresented, and the assumption of cause and effect is so far from being true that the repose of the English currency history in the nineteenth century is to be attributed to the absence of a bimetallic system; to its despite rather than its presence and influence. To instance only by France for the moment.

FRANCE: COURSE OF THE RATIO

The course of the actual or market ratio has been already stated in the table (supra, pp. 157-59). In the graphic representation of this (opposite) the legal ratio of 15 1/2 is represented by the fixed line x.y., the actual ratio by the fluctuating black line z. At no point do these lines coincide. After three years of fluctuations, 1803-06, now above and now below, the ratio sinks persistently below for seven years, 1807-13, touching the lowest point (a ratio of 16.24) in 1813. For the succeeding five or six years, 1813-19, the ratio was as consistently above the legal rate, though with less violence and width of divergence. From the latter year, 1819, up to 1850, its course was undeviatingly below 15 1/2, then from 1851-67—the period, i.e., of the great gold outputs of Australia and America—as undeviatingly above. From the last-named date until the close of the bimetallic system in France, and, indeed, up to our own days, the course of the commercial ratio has been again unbrokenly below the 15 1/2 ratio, and, as is too well known, with an ever-increasing enormity of divergence.

So much for the claim that the French law has dowered the world with a steady ratio.

Secondly, what has been the influence of this divergence of the commercial from the legal ratio upon France's store of precious metals? It has been exactly similar in effect and force with that wielded by similar trains of event and circumstance, in the monetary history of France during the four preceding centuries. The exact official figures of the import and export of gold and silver are not obtainable before 1822, and in a continuous stream not before 1830 (separably for the two metals, that is to say).[15]

FRANCE: BIMETALLIC EXPERIENCE, 1803-75

From the latter date, however, the testimony of the figures is as explicit as it is forceful. From 1830 to 1850, while the ratio remained continually below the legal 15 1/2, there was a profit on the import of silver, and a persistent and heavy import took place. In 1830 the (balance of the) silver imported amounted to a matter of 6 millions sterling, in 1831 to 7 1/4 millions, in 1834 to 4 millions, in 1837 to over 5 1/2 millions, in 1838 to nearly 5 millions, in 1841 to nearly 5 millions, in 1843 over 4 millions, in 1848 to over 8 1/2 millions, and in 1849 to nearly 10 millions. There was not a single year that was not accompanied by this import, and over the whole twenty-two years the total of importations reached the enormous figure of, approximately, 92 millions sterling. It must be clearly understood that this sum represents not the gross but the net importation or balance of imports over exports, and that the money passed into the currency of the country, taking its place as such and displacing gold pari passu. The movement of gold in the same time is represented by the red line in the accompanying diagram. Within the limits of very considerable exceptions, the correspondence of its fluctuations with those of gold is clearly perceptible. The silver, on whose coinage a profit or premium was offered by the existing French law to individuals, could only be bought or paid for by the export of gold or services and goods. During these years, 1830-50, it was quite apparently by the latter method, namely, by remittance of goods, as on the whole period there is a slight gain of gold, nearly 3 millions, contrary to what bimetallic law would have led to expect. The correspondence, however—a simultaneity—of the two movements, of import of silver and export of gold, is strongly marked in the years 1834-39 and 1841-48, and the failure of correspondence of the totals is to be explained by the statistics of French foreign trade balances during the years named.

With the year 1852, the decisive change in the ratio sets in with the new gold influx. The ratio rises above the 15.5 of the French law, and the profit on the importation and coining of silver vanishes. Its place is taken by a corresponding profit on the importation and coinage of gold. The fourteen years during which the ratio remained above the legal 15 1/2 witnessed the importation into France of a total net (or balance) of gold to the amount of 135 millions sterling, and a total net or balance of exportation of silver of 66 2/3 millions sterling. The coincidence of actual fluctuation will best be seen by the graphic representation of it in the table. With 1865 the final and, so far as the nineteenth century is concerned, the fatal change of the commercial ratio sets in. It sinks persistently and increasingly below the legal 15 1/2, in face and spite of the united mintings of the Latin Union, and at once the premium on the importation and coinage of gold changes into one on silver. From 1865 to 1875, one year before the abandonment of the coinage of the 5-franc piece and the consequent relinquishment by France of the bimetallic system, her net imports of silver amounted to 56 millions sterling.

As far as these figures of import and export are concerned, they show only the final results of the action of bimetallic law. The metal on whose importation and minting a premium was obtainable was imported, and in large quantities. That is the single fact standing out in large. The reciprocal fact—of a corresponding export of the metal over whose head the premium offered—does not emerge so distinctly, simply by reason of the complication of the subject of exports of metals with the wider general movement of trade balances. It also is, however, distinctly perceptible and demonstrable. But this is to speak only in large and of final results. What the intermediate course of events—of see-saw and flux, was, can only be adequately grasped from the records of the mintings, conjoined with the records of net import or export of the two metals.

TABLE OF THE NET IMPORTS OR EXPORTS OF GOLD IN FRANCE UNDER THE BIMETALLIC LAW, 1822-75.
Year. Net Import (Francs). Net Export (Francs). Year. Net Import (Francs). Net Export (Francs).
1822 4,000,000 ... 1852 17,000,000 ...
1823 ... 19,000,000 1853 289,000,000 ...
1824 37,000,000 ... 1854 416,000,000 ...
1830 10,000,000 ... 1855 218,000,000 ...
1831 10,000,000 ... 1856 375,000,000 ...
1832 ... 39,000,000 1857 446,000,000 ...
1833 24,000,000 ... 1858 488,000,000 ...
1834 ... 7,000,000 1859 539,000,000 ...
1835 ... 20,000,000 1860 311,000,000 ...
1836 ... 14,000,000 1861 ... 24,000,000
1837 ... 6,000,000 1862 165,000,000 ...
1838 ... 4,000,000 1863 12,000,000 ...
1839 24,000,000 ... 1864 125,000,000 ...
1840 49,000,000 ... 1865 150,000,000 ...
1841 ... 5,000,000 1866 465,000,000 ...
1842 ... 12,000,000 1867 409,000,000 ...
1843 ... 41,000,000 1868 212,000,000 ...
1844 ... 6,000,000 1869 275,000,000 ...
1845 ... 14,000,000 1870 119,000,000 ...
1846 ... 9,000,000 1871 ... 214,000,000
1847 ... 13,000,000 1872 ... 53,000,000
1848 38,000,000 ... 1873 ... 108,000,000
1849 6,000,000 ... 1874 431,000,000 ...
1850 17,000,000 ... 1875 454,000,000 ...
1851 85,000,000 ... ... ...

TABLE OF THE MOVEMENT OF SILVER DURING THE SAME PERIOD.
Year. Net Import (Francs). Net Export (Francs). Year. Net Import (Francs). Net Export (Francs).
1822 125,000,000 ... 1852 ... 3,000,000
1823 114,000,000 ... 1853 ... 117,000,000
1824 124,000,000 ... 1854 ... 164,000,000
1830 151,000,000 ... 1855 ... 197,000,000
1831 181,000,000 ... 1856 ... 284,000,000
1832 60,000,000 ... 1857 ... 360,000,000
1833 75,000,000 ... 1858 ... 15,000,000
1834 101,000,000 ... 1859 ... 171,000,000
1835 74,000,000 ... 1860 ... 157,000,000
1836 27,000,000 ... 1861 ... 62,000,000
1837 144,000,000 ... 1862 ... 86,000,000
1838 120,000,000 ... 1863 ... 68,000,000
1839 75,000,000 ... 1864 ... 42,000,000
1840 96,000,000 ... 1865 72,000,000 ...
1841 117,000,000 ... 1866 45,000,000 ...
1842 92,000,000 ... 1867 189,000,000 ...
1843 103,000,000 ... 1868 109,000,000 ...
1844 82,000,000 ... 1869 112,000,000 ...
1845 90,000,000 ... 1870 35,000,000 ...
1846 47,000,000 ... 1871 15,000,000 ...
1847 53,000,000 ... 1872 102,000,000 ...
1848 214,000,000 ... 1873 181,000,000 ...
1849 244,000,000 ... 1874 360,000,000 ...
1850 73,000,000 ... 1875 194,000,000 ...
1851 78,000,000 ...

TABLE OF THE COINAGE OF GOLD IN FRANCE, 1803-75, DURING THE BIMETALLIC RÉGIME.
Year. Gold (Francs). Silver (Francs). Year. Gold (Francs). Silver (Francs).
1803 10,209,840 23,171,988 1810 46,070,600 57,170,216
1804 38,463,980 47,517,195 1811 132,135,740 256,399,040
1805 20,474,500 46,385,909 1812 97,717,880 160,786,409
1806 38,533,760 25,241,651 1813 62,659,680 134,900,313
1807 18,019,920 5,008,903 1814 64,544,720 61,244,121
1808 32,311,260 67,833,922 1815 55,379,840 37,673,806
1809 15,206,440 44,296,494 1816 15,151,280 34,917,526

TABLE OF THE COINAGE OF GOLD IN FRANCE, 1803-75, DURING THE BIMETALLIC RÉGIME—continued.
Year. Gold (Francs). Silver (Francs). Year. Gold (Francs). Silver (Francs).
1817 52,197,080 37,143,579 1847 7,706,020 78,285,157
1818 95,410,460 12,406,076 1848 39,697,740 119,731,095
1819 52,410,660 21,235,077 1849 27,109,560 206,548,663
1820 28,781,080 18,436,620 1850 85,192,390 86,458,485
1821 404,140 67,533,866 1851 269,709,570 59,327,308
1822 4,718,100 100,679,137 1852 27,028,270 71,918,445
1823 408,180 82,911,680 1853 312,964,020 20,099,488
1824 7,071,700 114,476,007 1854 526,528,200 2,123,887
1825 45,616,360 75,203,291 1855 447,427,820 25,500,305
1826 925,540 90,835,623 1856 508,281,995 54,422,214
1827 3,160,940 153,868,978 1857 572,561,225 3,809,611
1828 8,025,740 161,466,133 1858 488,689,635 8,663,568
1829 1,118,180 102,642,617 1859 702,697,790 8,401,813
1830 23,516,640 120,187,089 1860 428,452,425 8,034,198
1831 49,641,380 205,223,764 1861 98,216,400 2,518,049
1832 2,046,260 141,353,915 1862 214,241,990 2,519,397
1833 16,799,780 157,482,863 1863 210,230,640 329,610
1834 30,231,200 218,288,304 1864 273,843,765 7,296,609
1835 4,550,060 99,966,149 1865 161,886,835 9,222,394
1836 5,097,040 43,242,399 1866 365,082,925 44,821,409
1837 2,026,740 111,858,697 1867 198,579,510 113,758,539
1838 4,940,140 88,489,324 1868 340,076,685 129,445,268
1839 20,670,000 73,637,742 1869 34,186,190 68,175,897
1840 40,998,240 63,795,527 1870 55,394,800 69,051,256
1841 12,375,060 77,517,941 1871 50,169,880 23,878,499
1842 1,852,720 68,391,170 1872 26,838,369
1843 2,826,600 74,148,998 1873 156,270,160
1844 2,742,260 69,134,980 1874 24,319,700 60,609,988
1845 119,140 89,967,609 1875 234,912,000 75,000,000
1846 2,086,420 47,886,145

During the years 1820-50, when the ratio remained below the legal 15 1/2 and there was a profit on the import of silver, the total silver coinage of the French Mint amounted to £127,458,322, while that of gold reached only £19,333,854. In the succeeding period, 1850-66, when the ratio changed and remained for fifteen or sixteen years in favour of gold, the total gold coinage reached £292,416,951, while the total silver coinage was scarcely more than 1 1/4 millions (£1,315,532).

At the beginning of this second period, 1851, the Bank of France held in its reserves approximately only 3 1/2 millions sterling of gold, whereas its silver amounted to more than 19 millions. At the close of the period indicated, 1866, the bank was holding 23 millions sterling of gold against nearly 5 1/2 millions of silver. In the former case the proportion of silver formed 85 per cent. of the total, in the latter only 19 per cent.

TABLE OF THE RESERVES OF THE BANK OF FRANCE, 1851-76.
Year. Gold (Million Francs). Silver (Million Francs). Percent of Silver to Total. Year. Gold (Million Francs). Silver (Million Francs). Percent of Silver to Total.
1851 83 478 85 1864 273 94 27
1852 69 442 86 1865 238 208 44
1853 102 214 67 1866 576 136 19
1854 301 193 39 1867 697 318 31
1855 72 147 66 1868 662 474 42
1856 94 104 53 1869 461 798 63
1857 110 126 52 1870 429 69 14
1858 294 260 47 1871 554 80 13
1859 250 329 56 1872 656 134 17
1860 144 272 65 1873 611 148 19
1861 225 100 30 1874 1013 314 24
1862 187 108 36 1875 1168 504 30
1863 119 72 37 1876 1349 540 28 1/2

The statistics of the Latin Union, up to the suspension of the bimetallic system will be separately dealt with.

Speaking only of the experience of France during these years of bimetallic rÉgime, the ebbing and flowing experience which has throughout been instanced as the chief characteristic of such rÉgime is most strongly marked. The legal ratio did not give the market ratio, and so far was it from giving France a stable currency, it was the one thing which unsettled it and made a stable currency impossible. The exposÉ des motifs of the law of 1876, which will be referred to in another connection below, puts the matter with official brevity. "The variations of the commercial from legal 15 1/2 ratio remained normal during the years 1824-67. All the same they sufficed to modify greatly the composition of the French circulation. After the predominance of silver, which became marked in 1847, the ratio from 1847-67 introduced gold in a large proportion, and measures had to be taken to retain in France the smaller silver coinage. Our silver monnaie d'appoint of .835 fine was created for this purpose."

To regard this question from a theoretic and international point of view, to the exclusion of any regard for the separate national interests of France, is a sheer absurdity. It mattered little or nothing to France that by unloading the stores of silver she happened to possess at the time of the gold discoveries of the Fifties she helped to steady the ratio for the world at large. It did however matter, and very much, that this process of exchange from the one metal to the other was attended with public loss, balanced only by illicit private gain, and with a disturbance of trade in every town of France through the disappearance of the smaller silver specie. Whether or not France or any other country is called upon to sacrifice herself thus—not once but every time the ratio fluctuates from below to above the legal ratio or vice versa—for the sake of an ideal, bimetallic, regulating, function, let common sense decide.

The French monetary commission of 1867 speaks thus of the situation—

"It is well known by all that this ratio [of 1803] by the simple reason of its being fixed could not remain correct. There was quickly a premium on gold, and silver remained almost alone in circulation until near 1850. The discovery of the mines of California and Australia suddenly changed this situation by throwing into the European market a very considerable quantity of gold. By the side of this force, which tended to create a divergence from the legal ratio by lowering gold, there was another which occasioned a rise of silver. Under the influence of various circumstances, too long to enumerate, the needs of the extreme East had grown in unusual proportions, and as silver is alone in favour there, it was exported in enormous masses. There was a premium on silver to the extent of 8 per mille, and it disappeared almost completely from circulation, yielding place to gold.

"Preoccupied by the situation the Government charged a commission to study the measures to be taken. Its labours are summed up in the report of M. de Bosredon (1857). After examining the system tending to preserve silver money intact by lowering the value of gold money, and conversely the system tending to the adoption of the gold standard by reducing the silver money to the state of billon, the commission did not decide between them. It confined itself, in fact, to counselling the Government to a transitory step—the raising of the export duties on silver.... The exportation of silver, therefore, continued; and if the disappearance of 5-franc pieces was not remarked, because they were replaced by gold, it was not the same with the scarcity of pieces of a smaller value employed in petty payments.

"Being informed of the obstruction to retail commerce by complaints carried before the Senate, and instructed by the example of Switzerland, which had in 1860 reduced the standard of its divisional money, the Minister of Finance appointed a commission, 1861, to study the remedy to be applied to the evil. This commission counselled the reduction of the standard of pieces of less than 5-francs to .834 fine. It did this in complete knowledge of the cause, fully recognising that in so doing the monetary unity of silver, characteristic of our system, would be thereby broken, at anyrate for its circulating form; for while the franc no longer existed in law, the 5-franc was disappearing in fact, so that the change was equivalent to the establishment of a gold standard."

This advice of the commission was however, by the law of 1864, applied only to pieces of 50 or 20 centimes.

The next step in the process was the formation of the Latin Union in the year following. The above-quoted commission speaks of the intentional aspect of this Union in these words: "This convention places in the front rank gold money, and reduces the pieces of silver of 2 francs and less to the rÔle of token money. It therefore definitely determines [consacre] the ascendency of the gold francs, and solves practical difficulties arising from the double standard."

This was written in 1867, less than two years after the formation of the Latin Union. It is not the view which prevails among bimetallists to-day as to the purpose and intentional bearing of that Union; but it is the historic truth none the less, and it was only the complete revolution in the conditions of production of the precious metals which made itself felt from 1871, which has given the Latin Union the aspect of a theoretic concert for the maintenance of, rather than as a defence against, a bimetallic system. If silver had not fallen in 1871 the Latin Union would still be the bulwark of defence of bimetallic France against the action of bimetallic law.

THE LATIN UNION

The formation of the Latin Union, therefore, was a measure of defence against the action of the bimetallic system in those countries which had adopted the monetary system of France, and lay exposed to all its disastrous fluctuations. The first and moving factor in its formation was Belgium. So far as related to silver, Belgium had adopted the French system by her monetary law of 5th June 1832. By the first article of this law the monetary unit was fixed at the silver franc of 5 grms. weight, and 9 fineness. For years Belgium endeavoured to maintain this law in its integrity. Public opinion, however, demanded the admission of French gold at its normal value, and this was conceded and decreed by the law of 4th June 1861. From that moment she felt all the oscillating movement which France was experiencing. The declaration of Article 1. of the law of 1832 became a dead letter; the gold standard took the place of the silver standard, and equally with France, Italy, and Switzerland, Belgium had to witness the disappearance of her small silver coins. To the previous abundance there succeeded a penury of small change, although the drain was not so immediately felt because of large reserve of silver 5-franc pieces (amounting to 48 millions of francs) held by the National Bank. In slightly over a year, 1st June 1861 to 8th November 1862, this stock of 48,645,000 francs had sunk to 14,629,000 francs, and in alarm the National Bank ceased, on the latter date, all payments in 5-franc pieces. Concurrently with this drain of the 5-franc pieces, the reserve of silver coins of less value began to be seriously affected by the sapping influence. During the two following years, 1861-63, there was little commerce in the precious metals owing to the American war. But in 1863 the movement of drain recommenced. The reserve of 5-franc pieces and the stock of divisional coins of lower denomination fell rapidly, to so low a point indeed as to become quite insufficient for the ordinary trade and small change demanded of the country. After a slight recovery in September 1865, the same downward course continued. The smaller coins, of 1-franc piece, and 50 centimes became so scarce that the bank could not supply the demands of manufacturers for the payment of wages, and the Government had to have resort to the coinage of nickel for small divisional money. The simultaneous experience of Switzerland and Italy is not so capable of statement and exact expression. But it was similar in kind. Previous to 1865 a net balance of over 12 millions sterling (consisting almost if not entirely of silver) had left Italy, and it was known to be the danger of entirely losing her silver which led Italy to the suspension of cash payments on 30th April 1866, and to her acquiescence in the Latin Union. It was not, however, Italy, but Belgium who first raised the note of alarm. Conscious that her monetary community with France made any independent efforts quite futile, the Belgium Government proposed to France a monetary union for all the countries which had adopted the franc as the basis of their currency. Taking up the proposition France invited Italy and Switzerland, together with Belgium, to send delegates to a monetary conference at Paris. At this conference Belgium proposed the adoption of the single gold standard—the silver pieces including the 5-franc pieces to be lowered by an agio, and made divisional money. Italy and Switzerland were of the same opinion, but their scheme failed before the opposition of France, and the final outcome of the conference was the establishment of the convention of 23rd December 1865.

This convention, which instituted the Latin Union, came into force on the 17th of August 1869; and under it one slight change was made in the internal currency system of France. The hitherto full-valued silver coinage from 2 francs downwards was changed into token money (being reduced to .835 fine), the 5-franc piece remaining as full legal tender.

The union was to last for fifteen years. It established an identity in the monetary system of the four powers, as far as weight and standard were concerned, and prescribed free coinage for any individuals bringing metals to the Mints—of gold into any form, and of silver into 5-franc pieces; and reciprocal acceptance of those pieces in any of the States of the union. Finally the minting of each State for national or currency purposes was limited to 6 francs per head.

This limitation, together with the regulation adopted, that the divisional coins should be issued at a rate inferior to that of the monetary standard, must be regarded as a measure of mutual defence against the sapping of the small coinage which had previously been experienced. According to this clause the maximum of mintings for national or currency purposes was presented thus—

For a time everything bloomed, the minting went merrily on, and private individuals (foreigners) reaped a profit at the expense of France. With the heavy fall in the ratio which made itself marked in 1873, however, events became too strong even for the Union, and Belgium took the initiative by passing a law enabling her Government to suspend or limit the coinage of the 5-franc piece. This principle was subsequently adopted by all the states of the Latin Union. During the years, 1874-76, three annual conferences of the Union were held at Paris, with the result that the limitation of the coinage of the 5-franc piece was fixed thus—

1874. 1875. 1876.
Belgium 12,000,000 15,000,000 10,800,000
France 60,000,000 75,000,000 54,000,000
Italy 60,000,000 50,000,000 36,000,000
Switzerland 8,000,000 10,000,000 7,200,000
Greece (which had acceded to the Union in 1868) 12,000,000

Of these states Switzerland alone did not coin up to her total, and at the conference in February 1876 her delegates pressed strongly for the entire cessation of the coinage of the 5-franc piece, and for the adoption of a gold standard. In this she was strongly opposed by Italy. The latter state, on account of the disappearance of her metallic currency before the inconvertible paper, had no interest in the limitation of the mintings of the Union. In the conference of 1874 she even sought and was authorised to coin beyond the quota accorded her, by a sum of not less than £800,000 in 5-franc pieces, on condition that such amount should be deposited as a metallic reserve of the Bank of Italy.

The force of circumstances, however, soon broke down even this policy of limitation. In the course of 1876 the fall of silver became more disastrously pronounced. In addition, it was no secret that the amounts accorded by the conferences of 1874-75-76 for the mintings of each state, had been assigned as maximum, not minimum limits, under the Latin Union.[16]

The next Mint convention of November 1878 would determine the Latin Union on the 31st December 1885, if not prolonged by further treaty. As the time approached the smaller states, such as Belgium, which had committed themselves to a large minting and thereby to the liability of having to liquidate or take back its own mintings—such 5-franc pieces as happened to be beyond its frontiers—at full value, in the face of a greatly fallen silver market, shrank from the responsibility, and sought and obtained a prolongation of the status quo until the end of 1891, and thenceforward by yearly agreement.

Finding that individuals treated the agreed amounts of mintings as a minimum limit, the French Government resolved to suspend the minting of the 5-franc pieces entirely. Accordingly, on the 21st March 1876, M. LÉon Say, Minister of Finance, submitted to the Senate a Bill to that effect. It was followed, eight days later, by a proposition of a law suspending the emission of "bons" for the coining of silver money 9/10 fine. The exposÉ des motifs of this Act is most remarkable:—

"The events which have happened for some time past in the relations of the precious metals have brought to a head the monetary question amongst us, although from 1815 Great Britain has laid down principles which have attracted round her an ever-increasing circle of nations.

"The theory of the double standard, on which our monetary law of the year XI. reposes, has been called in question ever since its origin.

"It is, to our conception, less a theory than the result of the primitive inability of the legislators to combine together the two precious metals otherwise than by way of an unlimited concurrence—metals, both of which are destined to enter into the monetary system, but which recent legislators have learned to co-ordinate by leaving the unlimited function to gold alone and reducing silver to the rÔle of divisional money. From 1857 the French Government has studied the question, and it may be stated that since that date the principle of the gold standard has won increasing favour through our several administrations."

Then follows an account of the monetary history of France during the period, as in brief rÉsumÉ already given. "If," the preamble continues, "from 1874, certain precautions had not been taken to arrest the effects of that grave perturbation in the ratio, France and her monetary allies would have seen their monetary circulation invaded by silver and correspondingly drained of gold." Hence the conventions of 1874-75-76, limiting the mintings of the members of the Latin Union, although, "according to us, the fall of silver in 1875 prescribed a complete cessation even for that year rather than a simple limitation."

Germany.

Until the unification of Germany in our own days, and the adoption of the present imperial currency system, German monetary history reproduces perpetually all the elements of that mediÆval system, bimetallic in fact though not theoretically so conceived, which England flung away in 1816, and from the toils of which France has not as yet completely emerged.

As safeguards against the evils of that system which she had felt with such bitter experience, and which had culminated in the crisis closing the Thirty Years' War, Germany could only feebly employ the mechanism of ineffectual Mint conventions. For a century she persevered in the effort to establish a common standard and Mint system, but in vain. The attempt had to be abandoned, and the reeling system left to its own process of disintegration; and when at last the events of 1871 came to give her unity in her coinage, as well as political life, there were not less than nine distinct and independent coinage systems in existence.

Hardly had the crisis of the Thirty Years' War passed out of mind before again the currency system had begun to work its baneful effects.

GERMANY: THE ZINNAISCHE STANDARD

In 1665 complaints were loudly made of the corrupt and debased state of the coin, due to export and culling. There is, indeed, quite a literature of these same complaints. The language of the Reichstattisches conclusum (Ratisbon, 12th September 1666) expressly attributes this export to the higher value set upon the gold in foreign countries, especially Venice. And the statement of the warden of the Mint of the three corresponding circles—Franconia, Bavaria, and Swabia—delivered in his Gutachten of the preceding May, was that the place of these good German ducats had been taken by very depreciated coins of Italy, France, England, and Holland. The three higher circles, accordingly—Franconia, Bavaria, and Swabia—met in conference and determined on a thorough investigation. The advice submitted to them was to raise the thaler from 90 to 96-kreutzer (see account of German coinage, Appendix V.), implying a lowering of the ratio from 15 to 14 1/8. This proposed scheme was accepted, in comitia, in 1667, the fifth article of the resolution specially mentioning the infliction of numerous intruding base foreign divisional money. From this scheme Brandenburg and Saxony held off, maintaining that the ratio had not been sufficiently lowered, considering the condition of the production of gold; and, in the same year, by a Mint treaty between Frederick William of Brandenburg and the Elector of Saxony, the so-called Zinnaische standard was adopted for those two states. According to this standard, the Reichs thaler was raised to 105-kreutzer (1 florin 45 kreutzers) and a ratio of 13 5/9 was established.

The result of this action of Saxony and Brandenburg was to strip the three higher circles of their silver, and in two years (1669) they anxiously met again to consider the question, not only of the foreign base coin everywhere prevalent, but also of the damaging exchange "and ceaseless melting down and exchange of proper coin from the circles."

By a strenuous effort the three circles carried through the Reichstag of 1680 their resolution to reduce the Reichs thaler to 90 kreutzer (ratio 15 1/4). From this decision the Emperor stood apart, with Bavaria and Salzburg, in putting the Reichs thaler at 96 kreutzer.

In view of such contrariety the impossibility of any general rÉgime for the empire became apparent, and further attempts at it were practically abandoned. It was the perception by the mercantile community, as well as by the various Governments, of the consequences of such disorder, that led to the establishment of the so-called Leipzig standard in 1690. This standard was promoted by John George III. of Saxony, and established by treaty between Saxony, Brandenburg, and Brunswick-Luneburg. According to it the Reichs thaler was raised to 120 kreutzers, or 2 florins, the mark being minted into 12 thalers or 18 guldens.

The result of the introduction of this standard was that in a few years the raising of the Reichs thaler to 120 kreutzers prevailed all over the empire. Sweden accepted it in the same year, 1690, and three years later the three upper circles acquiesced. At the same time the gold gulden was advanced to 2 florins 56 kreutzers. The previous ratio of 15 was thereby advanced to 15.1 (15 128/1278).

In 1738 the Reichstag determined on the adoption of the Leipzig standard for the whole empire; no alteration was made in the Reichs thaler, which was still retained at 2 florins and minted at 12 to the mark fine; but a graduated scale of agio was adopted for the divisional coins, which were minted at an equivalence of from 12 3/8 to 13 2/3 thalers to the mark fine. The difference (varying from 3/8 to 1 2/3 thalers) represented the agio.

GERMANY: THE CONVENTION STANDARD

From the first, however, the Leipzig standard had no more real success than any of its predecessors. Although theoretically accepted by all North Germany, and adopted in the Reichstag in 1738, it could obtain no actual general adoption through the empire. Even from the moment of the inception of the system in 1690, the process of competitively raising the course of the coinage had still continued, and pieces of 30, 20, 15, and 10-kreutzers were struck on a basis of from 20 to 21 1/3 gulden to the mark. The result was to put upon the carolus, which from 1730 onwards was minted in great quantities in South-West Germany, an agio of 10 per cent., a differentiation which was much increased by the disorders of the war of the Austrian succession. Such an agio swiftly drove the larger, full-valued specie out of currency, and during the continuance of that war the currency of Austria and South Germany was almost entirely reduced to depreciated fractional pieces, while the exchangers reaped untold advantage. It was on the close of this war, in 1748, that, with characteristic Austrian selfishness, though also with a boldness none of his predecessors had approached, the Emperor, Francis I., determined on the erection of the 20-gulden standard as a separate Austrian independent system, minting the mark of fine silver into 13 1/2 Reichs thalers, or 20 guldens. This latter system, after the accession to it of Bavaria, obtained the name of the Convention Standard, and the 2-gulden pieces minted under it are styled the Species or Convention Thaler. The convention system remained in force in Austria until the Vienna Coinage Convention of 1857, a period during which the Convention Thaler found wide circulation through South Germany.

The currency was eked out by the Austrian gold ducats and by vast quantities of foreign silver, French 6-livre thalers (current for 2 florins 48 kreutzers) and the crown or Brabant thaler (current for 2 florins 42 kreutzers). From 1807 onwards this latter coin was imitated by the South German States, Bavaria especially, in their crown thaler, minted on a fresh basis of 24 1/2 guldens to the mark of fine silver.

The selfish initiative of Austria was followed by Prussia and the South German States. The latter, the Rhenish and South German States, adopted in 1761-65 the 24-gulden; subsequently changed into the 24 1/2-gulden standard (see Appendix VI.). The overvaluation of the Kronthaler, which led to that latest development from a 24 to a 24 1/2-gulden standard, was the result of the immense circulation of French 6-livre pieces (known in Germany as Laubthalers) in South-West Germany. Graumann quite discredits the theory that the overswimming of South Germany by these French pieces, with all the confusion in the currency which resulted, was due to the wars and the progress of French arms, and directly attributes it to the depreciation of the French specie, and to their quite deliberate departure from the standard of French coinage as fixed in 1726.

SOUTH GERMAN AND PRUSSIAN SYSTEMS

In Prussia the reform of the coinage system was undertaken by her first King, Frederick I., father of Frederick the Great. In 1750 the latter adopted the 14-thaler or 21-gulden standard, subdividing the thaler into 24 groschens of 12 pfennige each. The measure was undertaken expressly to stop the export of gold which was going on. The adoption of a standard lower than the Convention standard effectually prevented the outflow of Prussian money, and it was not until the beginning of the present century, through the new Mint confusion which arose from the French Revolution, that Prussian money spread into Saxony, Hanover, Hesse, and even into the south-west. The second idea of Frederick's reform was to buy gold cheap, but in this it did not succeed. The intention was to obtain for five Prussian thalers the gold pistoles, which were purchasable for five convention thalers. This rate, however, never prevailed in the market, as from the first the pistole was valued at 5 1/4 Prussian thalers. During the Seven Years War, when Frederick was driven to a depreciation of his coinage, his system went to pieces. But an active reform was undertaken upon the conclusion of the peace of Hubertsburg, 1763. The 14-thaler system was re-established, although, as far as the smaller divisional silver coinage was concerned, the depreciation, in which Frederick had been imitated by the pettier states round him, continued into the present century.

In 1821 a minor alteration was made in the Prussian system, by subdividing the thaler into 30 instead of as previously 24 groschen, the former being distinguished from the latter by the title of silver groschen. To this Prussian or 14-thaler system Saxony acceded, as did also, in 1848, Mecklenburg and Oldenburg, with many minor differences of detail,—Saxony, for example, dividing the silver groschen into 10 pfennige; Mecklenburg dividing the thaler into 48 schillings of 12 pfennige each; and Oldenburg dividing it into 72 grotens of 5 schwarens each. The gold coin was supplied by the Prussian and Hanoverian 5 and 10-thaler pieces, the Friedrichs d'or, a favourite trade coin even in South Germany, and by Spanish pistoles circulating at an equivalence of 4 6-livre thalers.

CONFERENCE OF MUNICH, 1837

The confusion of these various German systems was further increased by the uncertainty and difference which had come to prevail in the unit of weight. In Austria alone there were 2 marks in use, the Vienna mark (= 288.644 grs.), and the Cologne mark (= 243.870 grs.). While in North Germany, and subsequently in the south-west, the Prussian mark (= 233.855 grs.) prevailed. It was as the outcome of a desire to remedy at once the evil condition and confusion of the currency, and the uncertainty as to weight standard, which led to the conference of Munich on 25th August 1837. At that conference, Bavaria, WÜrtemberg, Baden, Hesse, Darmstadt, and the Free State of Frankfort, adopted the 24 1/2-gulden standard as the standard for their several states. At the same time the Prussian mark (233.855 grms. = half the Prussian pound), was established as the Mint mark for the contracting members. For the divisional coinage (6 and 3-kreutzer pieces) a standard of 27 guldens to the mark was adopted, the details of the various fractional pieces being left to the different states. To this convention Hesse, Hamburg, and the two Hohenzollerns acceded in the following years.

This movement of South Germany gave a new impetus to the idea of Mint unification, and led to the General Mint Convention of the States of the Zollverein, agreed upon in full assembly of delegates at Dresden, 30th July 1838, and ratified also at Dresden on the 7th January 1839. The Dresden Convention was practically the first renewed attempt at Mint unification which Germany had seen since 1738. The contracting members to this general Mint convention were Prussia, Bavaria, Saxony, WÜrtemburg, Baden, Hesse, Saxe-Weimar, Eisenach, Saxe-Meiningen, Saxe-Altenburg, Saxe-Coburg and Gotha, Nassau, Schwarzburg-Rudolstadt, Schwarzburg-Sondershausen, Reuss, Reuss-Schleiz, Reuss-Lobenstein, Ebersdorf, and Frankfurt.

Briefly, the articles of the convention were as follow:——

"1. The Mint mark of all these contracting states of the Customs Union shall be the Prussian Mint mark = 233.855 grms.

"2. On this common weight standard the coinages of the contracting states shall be in accordance with the two systems in existence among the said states, viz. by thalers and groschen, according to the 14-thaler (or Prussian) system; or by gulden and kreutzer, according to the 24 1/2-gulden (or South German) standard. For the purpose of assimilation or equivalating, the thaler to be reckoned = 1 3/4-gulden, and the gulden = 4/7-thaler.

"3. The 14-thaler system to be that of Prussian Saxony, Hesse, Saxony, and Saxe-Altenburg, Saxe-Coburg and Gotha (Gotha), Schwarzburg-Rudolstadt (Unterherrschaft), Schwarzburg-Sondershausen, and Reuss; the 24 1/2-gulden system to prevail in Bavaria, WÜrtemberg, Baden, Hesse, Saxe-Meiningen, Saxe-Coburg and Gotha (Coburg), Nassau, Schwarzburg-Rudolstadt (Oberherrschaft), and the Free State of Frankfurt.

"4. Each state will confine its mintings to such pieces as prevail in the system of which it forms part.

"5. In larger specie, and also in divisional coin, each state to bind itself to exercise the greatest care to preserve the standard and weight.

"7. For the purpose of the commerce of the contracting states union or convention coins (vereinsmÜnze) shall be minted seven to the mark of fine silver, at an equivalence of 2 thalers or 3 1/2 guldens, fully tenderable throughout the Union.

"8. Alloy to be .9 silver, .1 copper; so that 6 3/10 pieces = 1 Mint mark in weight; remedy = .003.

THE DRESDEN CONVENTION, 1838

"9. From 1st January 1839 to 1842, at least 2,000,000 of these vereinsmÜnze to be coined, one-third value except part each year, and by the various states pro rata of their population. From 1842 onwards, in case of no new treaty, the rate of minting to be two millions vereinsmÜnze every four years, pro rata as before; each state to give an account of its mintings.

"10. Also of their separate trials of standard and weight.

"11, 13. None of the contracting states to set its particular internal specie at any different on a three months' notice, and to renew its currency at face value in case of depreciation.

"12. The states bind themselves not to issue divisional coins in excess of such pro rata requirements as above.

"14. For the divisional coinage the standard of the convention of Munich, 1837 (viz. 27 gulden), is adopted.

"18. The treaty to endure till the end of 1858. States intending to retire then to give two years' notice. From that date, if not discarded, the treaty to be periodically renewed (five-yearly)."

This treaty continued in force nominally until the later and still more famous convention of Vienna in 1857, before which date Hanover, Brunswick, and Oldenburg had also given in their adherence to it.

At the time of the Mint Conference and Convention of Vienna, therefore, there were, broadly speaking, three competing systems in Germany, viz. of Austria, Prussia, and South Germany or Bavaria.

One aspect of this latter conference of 1857, viz. its deliberations with regard to gold coinage, will be referred to separately. As far as relates to its attempted systematisation of these three German currencies the agreement took the following form:—

1. The pound of 500 grammes decimally subdivided, to be used as the basis of the coinage.

2. The competing systems to be assimilated to this basis by the following regulation:—

The thaler (or Prussian) standard of 30 thalers to the pound of silver to take the place of the 14-thaler standard, and to prevail in Prussia, Saxony, Hanover, Hesse, and a string of minor states.

The Austrian standard to be on the basis of 45 guldens out of a pound of fine silver, and to prevail in the Empire of Austria and the principality of Lichtenstein.

The South German standard to be on the basis of 52 1/2-gulden to the pound of silver (instead of the 24 1/2-florin standard formerly used), and to prevail in Bavaria, WÜrtemburg, Baden, Hesse, Frankfurt, and a few other places of South Germany.

The equivalence of the systems was to be—

One-thaler convention piece ( 1/30 pound) = 1 1/2 florins in Austrian currency = 1 3/4 florin in South German currency.

All the coins to be of unlimited validity in all the states, divisional coinage to be of a lighter standard than the coinage standard of the country, but lighter only within limits fixed. The tender of these latter to be limited to 20-thaler or 40-gulden.

THE VIENNA CONFERENCE, 1857

The regulations adopted by this Vienna Convention as to the gold coinage are very significant, and deserve special note.

The advance in the gold price of silver, due to the Californian and San Franciscan gold finds, acted on the silver-using countries. As soon as the price of bar silver exceeded 60 7/8-pence per standard oz., there resulted a melting down and export of the silver, in the countries which had adopted bimetallism at the 15 1/2-ratio.

It was this experience in France, and the allied group of countries, which led to the formation of the Latin Union in 1865. In mere point of date, that union had been preceded by the Vienna Conference and Convention by a matter of eight years. And as far as the regulations of this latter relating to gold coinage are concerned, there is evidence that the bimetallic action of France had driven Germany to her union of 1857, as a mere matter of self-defence, just as it later drove the Latin states to their union of 1865. In both cases the underlying motive was a wish to protect that part of their currency system which was threatened by bimetallic law. The premium on gold, on its minting, i.e. the profit to be made on minting it at 15 1/2 in France, while its market value was considerably less in Germany and elsewhere, drew the gold to France. It is a mistake to think that France attracted gold simply from California and Australia. She attracted it by the action of bimetallic law from her neighbour Germany, and replaced it by 5-franc silver mintings. The circulation of French 5-franc pieces was so extensive in South Germany, in the period preceding the Vienna Convention, that the cash reserve of the Frankfort bank was at one moment composed almost entirely of them.

The manner in which the Vienna Convention met the difficulty has the appearance of plausibility, though it proved in the end ineffectual. It determined not to establish a fixed ratio but to follow the market price of gold, apparently in the hope of attracting a natural or market supply.

"For the purpose of further facilitating mutual transactions, and for the promotion of trade with neighbouring countries, the contracting powers may coin convention trade coins in gold, under the names crown, and half-crown.

"1. The crown = 1/50 of a pound of fine silver.

"2. The half-crown = 1/100.

"The contracting powers may not coin any other gold piece, except Austria, which retains the right of coining ducats of the present value, to the end of 1865.

"The silver value of the convention gold coins in ordinary intercourse is entirely fixed by the relation of the supply to the demand. They must not, therefore, be considered as a medium of payment of the same nature as the legal silver currency of the country, and no one is legally bound to receive them as such.

THE VIENNA CONVENTION, 1857

"Each state is at liberty to permit convention gold coins to be paid into their offices instead of silver, according to a previously settled fixed rate, and to extend this permission either to all transactions and offices, or only to some. Such previous settlement of the rate is, however, never to last more than six months, and must at the expiration of the last month always be renewed for the following official treasury period of exchange. The rate cannot be fixed at a higher value than that given to such coinage by the average of the official commercial rate of exchange during the previous six months. Each government also reserves to itself the right to alter the rate at any time within the period fixed, and to suspend it when it thinks proper.

"A treasury rate of exchange shall henceforth only be fixed for convention gold coins, and not for other kinds of coined gold.

"The widest circulation to be given to the notices by which the official rate of exchange is fixed. They must be published beforehand, even when a change in rate for the next fixed period is not intended, and must contain—

"1. The statement of the average trade exchange at the principal places of exchange, during the six months immediately preceding.

"2. The treasury rate fixed accordingly.

"3. The duration of the value of the same.

"4. The reservation to alter or recall this rate of exchange if necessary, even before the expiration of the term named.

"5. The declaration that such rate of exchange only affects payments to be made into offices of the state.

"In the countries of the contracting powers pay-offices of the State, as well as public institutions, banks, etc., shall not be allowed in future, in payments to be made by them, to make any proviso with regard to the medium of payment in silver or gold, in such a way that for the latter a certain fixed relative value should be expressed beforehand in silver money."

From the point of view of Austria, this convention had been entered upon with the desire of effecting a gradual adoption of gold coinage, together with a concurrent ceasing of the compulsory note circulation. The outcome of the conference was, however, in quite distinct opposition to this desire, as the agreement which was finally arrived at established the maintenance of a pure silver currency. The continuance of the gold crown of 10-grs. fine gold was recognised only as a trade medium. This experiment of a trade gold coin failed completely, though it is none the less interesting intrinsically, as well as for its reflex bearing on the similar schemes which were proposed in the early years of the French Revolution. The premium on the minting of gold drew it to France, in preference to any other place where a simple market price prevailed. And the 20-franc gold pieces of France overflowed, while the German crowns could not struggle into existence.

GERMANY: ATTEMPTS AT REFORM, 1860-70

The attempt which was made by a commercial conference at Hamburg, at the time of the meeting of the Vienna Conference, to secure the introduction by the Hamburg Bank of a gold instead of a silver valuta, remained equally ineffectual.

As far as concerns the establishment of a simple and single monetary system for Germany was concerned, this Vienna Convention, the last great convention which Germany saw previous to the reconstruction of her system in 1871, was as futile as that of Dresden in 1838, or as all the conventions of the seventeenth and eighteenth centuries previously.

The consciousness of the need of such simplification and unification, however, became thereby only the more apparent. Four years later the first German Handelstag, which met in May 1861 at Heidelberg, turned its first and special attention to the erection of some common currency system. The recommendation which it finally concluded upon was the adoption of the Drittelthaler as the unit mark, with a decimal subdivision. Four years later the third Handelstag, which met at Frankfort (September 1865), confirmed the resolution, with the additional proposition of the minting of a gold piece identical with the 20-franc piece, the value of which should be regulated from time to time; the scheme being, therefore, as before, that of a silver standard, with gold as trade money. The fourth Handelstag met at Berlin in October 1868, and again the matter was most seriously discussed. With the single exception of the Berlin members, all the deputies declared for the adoption of the gold standard. As, in the preceding year, Austria had withdrawn from the German Monetary Union of 1857, she no longer stood in the way of this proposition, and the erection of the North German Union distinctly favoured the project.

In June 1870 the Bundesrath of the North German Union resolved upon a reform and unification of the paper money, as preparatory to a complete currency reform, and in the same month the Chancellor of the North German Union had decided to call a Mint Convention. The outbreak of the Franco-German War immediately afterwards put a short stop to the proposal.

A long train of preparation had thus been laid, and there can be little doubt as to what the ultimate direction of German monetary legislation would have been, even without the war, and the consequent erection of the Empire. That the latter event, however, enormously facilitated the process cannot for a moment be questioned.

GERMANY: NEW IMPERIAL SYSTEM, 1871

When the subject was taken up after the Franco-German War, the determination to adopt a gold coinage was only gradually arrived at. In the original plan, as drafted soon after the conclusion of peace, the new gold coinage proposed was intended not to be tenderable, for the meantime, in private commerce. Such a provision roused all the opposition of the mercantile community, and in consequence of the agitation the scheme, as finally submitted to the Reichstag, was for a gold monometallic system. The law passed on the 4th December 1871, and the great operation of recoinage and conversion was immediately entered upon. It was greatly favoured by the ratio existing at the moment, and by the metallic condition of the world. The ratio taken as the basis of the computation was the French 15.5, accepted because of its long and present wide employment.

The previous silver standard thalers were taken as equivalent to 3 marks.

30 thaler = 90 mark = 1 pound fine silver.
90 × 15.5 = 1395 marks.

The gold piece of 10 marks was therefore coined at a tale of 139 1/2 to the pound of fine gold.

Propositions were made to the Reichstag that the 20-franc piece should be made equivalent to the English sovereign, or to the 25-franc piece, giving respectively a ratio of 15.17 or 15.31, but at the moment the price of silver in the London market ruled between 60 7/8 and 60 3/4 pence per ounce, i.e. at a mercantile ratio of 15.49-15.52. It was this fact which decided the adoption of the French ratio.

The chief Acts which have accomplished the reform are of dates 5th December 1871 and 9th July 1873, the first declaring the monetary system and the latter the law of tender.

The unit of the system is the mark, which is the 1/1255.5 part of a pound of gold of 500 grammes at 9/10 fine, and is coined into pieces of 20 and 10 marks. The gold crown is a 10-mark piece, is 9/10 fine, and struck at a tale of 139 1/2 pieces to the German pound; charge for coinage, 3 marks per pound of fine gold.

The pound of fine silver is struck into 100 marks, 9/10 fine. The total amount of silver coin not to exceed 10 marks per head of population. No individual need accept more than 20 marks of imperial silver coin in payments. They are accepted in any amount by the Empire and by the Federal States.

All other German coins are no longer legal tender, and have been withdrawn, with the single exception of the thaler pieces. Whatever pieces of this kind still exist are legal tender to any amount, like the imperial gold coins, each being equal to 3 marks. An Act of 20th April 1870 provides that Vereinsthalers coined in Austria before 1867 should also be full legal tender. An Act of 6th January 1876 has authorised the Bundesrath to put the thaler pieces and the Austrian Vereinsthalers on the same footing as imperial silver coins, i.e. to make them legal tender only up to 20 marks, the thaler being still reckoned at 3 marks. Since the suspension of silver sales and of the withdrawal of the silver thalers (May 1879) there is no likelihood that the Bundesrath will make use of this authority conferred upon it.

In briefest rÉsumÉ, the course of the silver coinage during the preceding century may be presented thus:—

GERMANY—COURSE OF THE 1-THALER PIECES.
Thalers.
Total minted during 1750-1816 64,380,936
Withdrawn by the Government of the States 27,788,956
Withdrawn under the new Imperial System, 1871-3 5,652,999
" " 1874 6,319,170
" " 1875 2,900,202
" " 1876 2,582,123
" " 1877 1,465,424
" " 1878 864,253
47,573,127
Leaving a balance not accounted for of 16,807,809
Thalers.
Total minted during 1817-22 24,261,735
Withdrawn under the new Imperial System, 1871-3 3,623,511
" " 1874 5,147,970
" " 1875 2,580,580
" " 1876 2,373,496
" " 1877 1,421,719
" " 1878 766,908
15,914,184
Leaving a balance not accounted for of 8,347,551
Thalers.
Total minted during 1823-1856 91,031,741
Withdrawn under the new Imperial System, 1874 40,000
" " 1875 566,677
" " 1876 11,250,277
" " 1877 5,753,269
" " 1878 4,640,068
22,250,291
Leaving a balance not accounted for of 68,781,450
Thalers.
Total minted during 1857-71 215,863,120
Withdrawn by the Government of the States 2,538
Withdrawn under the new Imperial System, 1875 3,000
" " 1876 25,958
" " 1877 64,806,347
" " 1878 18,915,167
109,635,938
Leaving a balance not accounted for of 106,177,182
Thalers.
On the whole period, 1750-1871, the total minted 1-thaler pieces amounted to 395,537,532
Total withdrawn 195,423,540
Leaving a balance not accounted for of 200,113,992

Allowing 83,062,882 thalers as a rough equivalent for the loss by attrition, there is still a deficit of 117,051,000 thalers, or about £17,557,650 sterling to be accounted for (and laid to the account of remintings and loss by arbitrage).

ACCOUNT OF THE MINTING OF THE RECONSTRUCTED GERMAN EMPIRE—GOLD—FROM 1872 TO DEC. 1878
Origin of the Bullion supplied to the Mint. Supplied for the Empire. Supplied for Private Accounts.
Pounds Weight Fine Gold. Pounds Weight Fine Gold.
German gold coin of the old type 64,092.3 11.4
Bars 402,382.6 214,825.7
Austrian gold coins 381.7 711.9
Francs and Napoleons 391,166.5 809.7
Sovereigns 30,181.3 223.1
Russian gold coins 28,252.3 20,862.1
Isabellas 12,822.9 ...
Dollars and Eagles 16,860.1 20,548.8
Turkish gold coins 51.0 1,084.0
946,191.2

Making a complete total, with odd amounts from various sources, and including imperial gold coins minted in 1877-78 but now no longer current, of 1,205,786 lbs. weight = £84,103,584.

SALES OF SILVER BY THE GERMAN GOVERNMENT FROM 1873 TO THE SUSPENSION OF THE SALES IN MAY 1879

SALES OF SILVER BY THE GERMAN GOVERNMENT FROM 1873 TO THE SUSPENSION OF THE SALES IN MAY 1879
Date. Pounds of Fine Silver. Product. Price Per oz.
Marks. Pence.
1873 105,923.372 9,296,682.77 59 5/16
1874 703,685.175 61,135,670.29 58 3/4
1875 214,898.594 18,208,449.08 57 1/4
1876 1,211,759.204 93,936,482.37 52 3/8
1877 2,868,095.533 230,424,238.51 54 5/16
1878 1,622,696.403 126,203,852.08 52 9/10
1879 377,744.712 27,934,417.89 50
7,104,895.993 567,139,992.99

The total silver withdrawn from circulation up to the close of 1880 was 1,080,486,138 marks.

Of this amount 382,684,841 marks were delivered to the Mint for coinage into the new imperial silver coins.

The remaining 696,797,069 marks were melted into silver and produced 7,474,644 pounds of fine silver. Of this quantity 7,102,862 were sold up to May 1879. The balance of unsold silver still in the hands of the Imperial Government is 339,353 pounds of fine silver.

England.

Charles II. began his regulation of the currency by the proclamation of 29th January 1661, fixing the coins to be current and their tariff. This proclamation was followed by another, of 10th June 1661, against the export of gold or silver, and against buying or selling the metals at higher rates than were given at the Mint, a practice to which the proclamation attributed the scarcity of money. This edict proved of no avail, for, in spite of it, the gold coins were exported in such quantities that they were current more abundantly in foreign parts than in England. As the result of deliberation of the Privy Council, assisted by the Commissioners of Trade and officers of the Mint, who all attributed the export to the higher price of gold abroad, it was determined to raise the price of the gold coins to or near the value which they had on the Continent at the moment. Accordingly, by proclamation of the 26th August 1661, the value of the gold unite was raised from 22s. to 23s. 6d., and other gold coins in proportion, the silver currency being left unaltered.

In referring to the Act for the free trade in gold and silver (supra, p. 162), mention has already been made of the motive of the legislator, namely, to increase the importation of the metals to the Mint. Exactly similar was the intention, as expressed in the preamble of the succeeding Act of 1666 (8 Charles II. c. 5), which abolished the right of seigniorage, thereby establishing free and gratuitous coinage in England—the principle of minting still in force in this country.[17]

The testimony of both Act and declaration as to the scarcity of money is confirmed by actual record. In the following year, 1667, there was a great scarcity of money, and dollars and pieces of eight were bought up by the goldsmiths and bankers for 4s. 3d. each, and instead of being brought to the Mint were at once exported to France for 4s. 10d. and to Ireland and Scotland for 5s.

According to the new indenture for the coinage of 1670, a slight reduction in the standard of the gold took place, the pound of crown gold (22 carats fine) being to be minted at a tale of £44, 10s. The scarcity of money still continued, however, and the separate experience of Ireland only corroborated that of England. The general statement of the case as to the fate of the coined money since the Act of 18 Car II., which instituted free coinage, is thus put by Sir Dudley North, in his Discourses upon Trade: "I call to witness the vast sums that have been coined in England since the free coinage was set up. What is become of it all? Nobody believes it to be in the nation, and it cannot well be all transported, the penalties for so doing being so great. The case is plain—the melting-pot devours it all; and I know no intelligent man who doubts but the new money goes this way. Silver and gold, like other commodities, have their ebbings and flowings; upon the arrival of quantities from Spain, the Mint commonly gives the best price, i.e. coined silver for uncoined silver, weight for weight. Wherefore it is carried into the Tower and coined. Not long after there will come a demand for bullion to be exported again. If there is none, but all happens to be in coin, what then? Melt it down again; there's no loss in it, for the coining costs the coiners nothing. Thus the nation hath been abused and made to pay for the twisting of straw for asses to eat."

By the time of the accession of William III. the scarcity of silver had become so great as to cause a petition from divers working goldsmiths in and about the City of London to the House of Commons (9th April 1690). It stated "that upon search at the Customs they found that since last October entries had been made of 286,102 oz. of silver in bullion, and 89,949 dollars and pieces of eight for exportation by divers private persons, and they doubted not but it would appear that not only the East India Company, but also divers Jews and merchants, had of late bought up great quantities of silver to carry out of the kingdom, and had given 1 1/2d. per oz. above the value, which had encouraged the melting down of much plate and milled monies; whereby for six months past, not only the petitioners in their trade, but the Mint itself had been stopped from coining."

ENGLAND: THE EXPORT IN 1690

The petition was referred to a committee of the Lower House, which reported on the 8th May that great quantities of silver had been exported, of which seven-eighths had been shipped off by the Jews, who would do anything for their profit. The reason for the exportation, too, was plain, for the French king, of late finding his money very scarce, had raised his coin 10 per cent., which was an encouragement to send silver to fill his coffers, and therefore the Jews exported it daily in very great quantities. The melting down of £1000 of milled money for exportation was attended with a profit of £25 ready money and upwards, silver being coined at the Mint at 5s. 2d. per oz., but at the time of exportation sold generally at 5s. 3 1/2d. The remedies proposed to the committee were either a prohibition of export or the enhancing of the English monies.

Not less than three measures were presented to the House for the prohibition of export—one of them by Sir Richard Temple—but were all lost; and, meanwhile, the exports to Holland and France continued. In November 1690 it was calculated that during the preceding sixteen months about 140,000 oz. had been exported.

In addition to this actual drain of coinage, the processes of culling, clipping, and counterfeiting, which had been going on through the reigns of Charles II. and James II., had resulted in an unexampled depreciation of so much of the coinage as remained. A large portion of the currency consisted of iron, brass, or copper-pieces plated, and such coins as were of good silver were worth scarcely one-half their current value.

This statement is more than borne out by quite reliable computations which were made in the process of the recoinage five years later. A medium lot of 5 1/2 bags, containing in tale £57,200 of the called-in currency, and which should have weighed 221,418 oz. 16 dwt. 8 grs., was found to weigh only 113,771 oz. 5 dwt. According to the accounts of Neale, then master and warden of the Mint, 4,695,303 dwt. 15 oz. 2 grs. of the clipped silver money produced only 790,860 lbs. 1 oz. 19 grs., implying a depreciation in weight alone of over 47.75 per cent.

The process of stripping the country of currency was increased by the continual pouring out of money in aid of William's wars, and the loss in exchange on such large remittances made the evil only too apparent. The one or two millions yearly remitted to the Continent for the British armies were negotiated in Holland in a thousand ways to England's prejudice. Partisan statements were made that whereas in the beginning of the war the Dutch allowed 43 schillings for an English pound they gradually lowered the exchange to 28 schillings. Guineas, which were equal in value to 21s. 6d. in silver, rose to 30s.; and they would have risen to a still higher rate if the officers of the exchequer and the receivers of public revenue had not refused to receive them in payment at the increased value.

In 1695 the matter was taken up in the House of Commons, and a committee appointed. The report of this committee, which was never passed, was based on the proposition of a reduction of standard. By Montague's influence the proposals were dropped, and it was not till the 22nd November that the Act for remedying the ill state of the coins passed. It is well known that the unwise determination of the Government of William III. to adhere to the pre-existing standard was due to the action and contrivance of Montague as Chancellor of the Exchequer, and to the influence of Locke's writings. By a subsequent series of Acts, based on the complaints of merchants representing the evils resulting from the unsettled price of gold, the price of the guinea was ordered to be gradually reduced from 30s. to 28s., 26s., and finally 22s., before 10th April 1696.

ENGLAND: RECOINAGE OF 1696

This great recoinage scheme was only completely accomplished in 1699, having occupied the greater part of four years, and after a long series of Acts and proclamations of, occasionally, very doubtful wisdom.

According to the accounts of the officers of the Mint, the new silver coin amounted in tale to £6,882,908, 19s. 7d. The worn and clipped money called in was estimated roughly at £4,000,000, on which the loss was about £2,000,000; the whole charge and loss being stated at not less than £2,700,000. It is significantly affirmed that, in a manner, all the called-in silver was found to consist only of pieces coined between the days of Edward VI. and 1662, a sure indication of the fate which had befallen the coinage issued since the Restoration.

Before the transaction was finally complete the last safeguard and complement of the system had been adopted, in fixing the relation of the gold coinage to the new silver issue. On the 22nd September 1698, a report was given in to the House of Commons, signed by four names, including that of John Locke, stating that the value of gold in Holland and the neighbouring countries was, as near as could be computed upon a medium, 15:1 in silver; and that, according to this value, the currency of the guinea at 22s. was too high, and occasioned a disproportionate importation of gold and an exportation of silver. The bringing down of the guinea to 21s. 6d. would make the value of English gold and coin very near 15 1/2:1 to silver, which, though not so low as the rate in Holland, would in their opinion be sufficient to correct the error.

In consequence of this report the Commons resolved that, under the Act 7 and 8 William III. chap. 19, no person was obliged to take guineas at 22s. a piece. The price then fell to 21s. 6d., at which rate they were received by the officers of the revenue. With the exception of this merely declaratory tariffing of the guinea, it is to be borne in mind that this recoinage of William's reign was carried out on the principle enunciated by Montague, and backed by the authority of Locke, namely, that of a retention of the old standard, although in the face of a clearly established advance in the value of silver, and in face of quite irrefutable answers to all Locke's arguments. Momentarily the scheme succeeded; the adverse exchange was instantly redressed, while the renewal of the coinage and the ratio of 1698 was sufficiently above the continual ratio to turn the flow of gold, as doubtless was the (unexpressed) design in adopting it. According to Burnet the packet-boat from France seldom came over during the following winter without bringing 10,000 louis d'or, and often more. "The nation was indeed filled with them, and in six months a million of guineas was coined out of them. The merchants in fact said that the balance of trade was then so much turned to our side that whereas we were wont to carry over a million of our money in specie, we then sent no money to France, and had at least half that sum sent over to balance the trade."

ENGLAND: EFFECTS OF THE RATIO OF 1698

The circulation of French and other foreign gold became so great that on the 5th February 1701 the Council issued a proclamation that the louis d'or and Spanish pistole should not pass for above 17s. Such action at once brought those coins to the Mint, and nearly 1 1/2 millions were coined out of them.

It was not seen at the moment that the establishment of this ratio so favourable to gold was pari passu unfavourable to silver. The idea was entertained that the French gold came over to bribe English members, i.e., on mere political causes. The hypothesis was needless as it was incorrect. Gold came over because it was higher priced in England than abroad through the ratio of 1698, and for the same reason silver left the country to pay for the gold. The one movement was the essential counterpart of the other, and made itself at last only too visible.

As early as the seventh year of Anne's reign—only nine years after the completion of this great recoinage, it was found necessary to give further encouragement to the coinage of silver by offering a premium on every ounce of foreign coins which should be brought to the Mint within a limited time. The premium was not to exceed 2 1/2d. per oz., and the time limited was from the 17th April to the 1st December 1709.

Such a measure has been already noticed in the history of France; it was indeed a design frequently employed there under the title of Surachat, and it always proved as futile as the Government of Anne found it to be. As the drain continued, representations were made by the officers of the Mint to the Treasury, and in 1717 the House of Commons requested these representations to be laid before it (December 20th). On the same and following day a remarkable speech was made by a member, Mr. Aislabie, who took notice of the great scarcity of the silver species, and proposed the remedy of lowering the gold species. On the second day he was seconded by Mr. Caswall, who suggested that the overvaluation of gold in the current coins of Great Britain had caused the export of great quantities of silver species, "and to that purpose [i.e. the purpose of his argument] laid open a clandestine trade, which of late years had been carried on by the Dutch, Hamburgers and other foreigners, in concert with the Jews and other traders here, which consisted in exporting silver coins and importing gold in lieu thereof; which being coined into guineas at the Tower, near 15 pence was got by every guinea, which amounted to about 5 per cent.; and as these returns might be made five or six times in a year considerable sums were got by it, to the prejudice of Great Britain, which thereby was drained of silver and overstocked with gold." He concluded by proposing to lower the price of guineas and all other gold specie.

ENGLAND: SIR ISAAC NEWTON'S REPORT, 1717

His speech was received with applause, and the House unanimously petitioned the King to call the guinea down to 21s., and other gold species in proportion. To this George I. immediately acceded, and the proclamation to that effect verbatim was issued on the following day, 22nd December 1717.

The report for which the House had called two days earlier, and which was produced on the 21st December, was the celebrated report made some months before by Sir Isaac Newton as master of the Mint, at the demand of the Commissioners of the Treasury. It is a document deserving the careful attention of every student of currency history. Newton reviews the ratio in each of the then commercial nations, and shows the effect of difference of ratio in producing export and disturbance of one or other metal. "Gold in Spain and Portugal is of sixteen times more value than silver of equal weight and alloy; at which rate a guinea is worth 21s. 1d. net; this high price keeps their gold at home in good plenty, and carries away the Spanish silver into all Europe. So that at home they make their payments in gold, and will not pay in silver without a premium. Upon the coming in of a plate [silver] fleet the premium ceases or is but small, but as their silver goes away and becomes scarce the premium increases and is most commonly about six per cent."

In France the ratio was 15:1, and the guinea therefore worth 20s. 8 1/2d. In Holland it was worth 20s. 7 1/2d., in Italy, Germany, Poland, Denmark and Sweden, from 20s. 7d. to 20s. 4d. "In China and Japan the pound weight of fine gold is worth but 9 or 10 lbs. weight of fine silver, and in East India it may be worth 12 lbs., and the low price of gold in proportion to silver carries away the silver from all Europe." "If gold were lowered only so as to have the same proportion to the silver money in England, which it hath in the rest of Europe, there would be no temptation to export silver rather than gold to any part of Europe, and to compass this last there seems nothing more requisite than to take off about 10d. or 12d. from the guinea."

ENGLAND: THE STATE OF COINAGE IN 1760

In a subsequent report of the 21st September 1717, Newton stated that, since the beginning of 1702 to September 1717, the gold coined at the Mint amounted to £7,127,835, while the silver within the same period only amounted to £223,380, of which £143,086 had been brought to the Mint in response to the premium offered; in 1709 and 1711, of their own free will, the goldsmiths had only brought a matter of £21,220 to the Mint. In the House of Lords, early in the following year, it was proved that during the year 1717 the East India Company had exported nearly 3,000,000 oz. of silver.

The immediate purpose of the above proclamation of 22nd December 1717 was for a time thwarted by a speculative hoarding of silver in expectation of a further calling down of the gold species; and it was to cut the ground from under this speculation that in January 1718 both Houses declared their determination not to alter the standard of gold and silver coins in the kingdom, and proceeded in place of such alteration to prepare a bill for preventing the melting down of the coins of the kingdom.

It is demonstrable, even from Sir Isaac Newton's own figures, that the calling down of the guinea to 21s., though largely, was not completely effective in destroying the profit of arbitrage transactions with Holland. With the guinea at 21s., the ratio was still 15 14295/68200 while in France and Holland the ratio was 15 or under. That the process of culling and exporting the heaviest silver specie still continued is proved by the state of silver coinage twenty years later, when shillings were found to be deficient in weight, by between 6 and 11 per cent., and sixpences between 11 and 22 per cent., and all species so scarce as to threaten greatest confusion in every branch of trade. At the accession of George III., 1760, the silver coinage was found in so imperfect a state that the crown pieces had almost entirely disappeared, though minted since 1795 to the amount of over a million and a half sterling. Of half-crowns, likewise minted to the value of £2,329,370, only defaced and impaired specimens remained current, while shillings and sixpences had lost every sign of impression. Up to 1763 only a matter of £5791 in silver had issued from the Mint—practically no coinage at all.

Gradually however, owing to the force of wider principles at work, the matter of the ratio righted itself. Ever since 1756 the value of gold had been rising all over Europe. In 1759 the continental ratio was still calculated at 14 1/2, as compared with 15 1/5 in England; but by 1773 the continental ratio had overtaken the English, and the market price of standard silver had risen to 5s. 2d. per oz.—the English Mint rate. In the greatly depreciated state of the silver coinage—three-fourths of it was said to be base—even the approach of a fair ratio acted prejudicially on gold. Already, in 1771, the export of gold to Holland had become noticed, and it was asserted that the gold coins had never before been so deficient. They were sent over to Holland, and there filed and returned and put into circulation—a bimetallic phenomenon that always recurs in a currency containing two differently depreciated elements.

ENGLAND: STATE OF THE COINAGE IN 1774

The idea that bimetallic action replaces one good metal by another, an equal weight of one metal for that of the other, a good undepreciated coinage of silver for a good undepreciated coinage of gold, or vice versÂ, is not borne out by a single instance in history. Bimetallic action always substitutes the less for the greater, whether weight or value, the more depreciated for the less, or the depreciated for the perfect standard coin. In this particular instance, 1774, the depreciation of silver had been the result of the action of a too high ratio from 1717 onwards; the depreciation of gold was effected in a much less time between 1770 and 1773, simply because the already depreciated state of the silver causing that differentiation of value, which is the bullionist's opportunity, happened to coincide with a natural rise of the value of gold all over the Continent. The result, therefore, of fifty years of bimetallic rÉgime left England with a currency depreciated in both its limbs, in both gold and silver, and as deficient in the quantity current as in the weight of the individual pieces. This is not in keeping with the theory of bimetallism as developed to-day, according to which the transition from one coin to the other would only be made at the point of equation, and the substituted metal would equalise that displaced. This is theory. The facts of the situation in 1774 are not theory but history, and tell a different tale.

"The evil was so great," says Lord Liverpool, "that the Government found it necessary to take this difficult subject into their immediate consideration. On this occasion I addressed a letter to a noble Lord, who was then Chancellor of the Exchequer, suggesting what appeared to me the proper remedy for this evil. I proposed that, with a view to the general reform of the coins of the realm, all the deficient gold coins should in the first place be called in and recoined, and that in future the currency of the gold coin should be regulated by weight as well as by tale, and that the several pieces should not be legal tender if diminished below a certain weight. Your Majesty was pleased to approve of this advice and to propose to your Parliament, on 13th January 1774, the calling in and recoining of all the deficient gold coins; and the Chancellor of your Exchequer opened the whole of this plan to the House of Commons, who approved of the measure, which was carried into immediate execution without any complaint and with great success. The defects which had previously existed in this species of coins were thereby removed, and the regulation, then established, of weighing the gold coin has been the means of preserving it at nearly the state of perfection to which it was then brought."

ENGLAND: RECOINAGE OF 1774

The resolutions of the House of Commons on which this recoinage depended were passed on the 10th May 1774. After stating the depreciation existing in the gold coinage the House asserted—(3) that it has been a practice to export and melt down the new and perfect gold coin soon after it is issued for private advantage, to the great detriment of England; (4) that while pieces of gold coin, differing so greatly in weight, are allowed to be current under the same denomination and at the same rate and value, great quantities of the new will continue to be exported and melted down, and, and perfect pieces there is reason to apprehend, will be recoined into pieces the most deficient that are allowed to be current."

The House then goes on to adopt the principle of limiting the depreciation to be allowed on any single coin, i.e. of making the coins current by weight as well as tale within the limits allowed.

The House next turned its attention to the silver element of the currency. At the outset it was met by the patent fact that the depreciated silver coinage had been made the handle or lever, or point d'avantage, in all the operations against gold. "Whereas," is the recital of the Act of 14 George III. c. 42, "considerable quantities of old silver coin of this realm, or coin purporting to be such, greatly below the standard of the Mint in weight, have been lately imported into this kingdom, and it is expedient that some provision should be made to prevent the practice," etc. The Act therefore decrees the prohibition of importation of light silver coinage into the kingdom, and its confiscation in case of discovery as such. "And be it further enacted ... that no tender in the payment of money made in the silver coin of the realm, of any sum exceeding the sum of £25 at any one time, shall be reputed in law or allowed to be a legal tender within Great Britain or Ireland for more than according to its value by weight, after the rate of 5s. 2d. per oz. of silver, and no person to whom such tender shall be made shall be any way bound thereby or obliged to receive the same in payment in any manner than as aforesaid; any law, statute, or usage to the contrary notwithstanding."

The importance of this latter epoch-making clause is vital. It is the first enactment of a law of tender in the history of English monetary legislation, and it was the first step towards the shaking off the incubus of that mediÆval currency system which was even then only coming to be understood in all its fatal perniciousness. For statesmanship, the only parallel to it is that Act of Henry III. of France, which proved so shortlived in its adoption (see supra, pp. 87-88). It was the first step in the evolution of that system of a safeguarded currency which was finally constructed in 1816.

This Act prohibiting the importation of light silver was renewed in 1776 for a further two years, and was again, in 1778, continued until the 1st day of May 1783, and from thence to the end of the next session of Parliament. On the 21st June 1798 the Act, being then expired, was revived and further continued to the 1st day of June 1799 by a new statute, and on the 12th July 1799 the Act was made perpetual by statute of 39 Geo. III. c. 75.

The later legislative action with regard to silver belongs to the final construction of the English currency system. In the main, the recoinage of gold was accomplished in the year 1774, though it lingered over the three succeeding years as appears by the items in the Appropriation Acts.

The accounts of grants for recoinage were as follows:—

1774. The first grant £250,000 0 0
1775. To the bank for receiving the deficient gold coin 46,846 0 0
For extraordinary charges of the Mint 22,824 19 0
1776. Further grant 92,421 14 1 1/4
1778. Further grant 105,227 8 3
£517,320 2 2 1/4

The scope of this series of Acts of 1774 will be seen at a glance; as well as the tendency in policy, namely, in favour of gold, which it indicated. The gold coinage was renewed, and as a safeguard against its future depreciation the existing depreciated coin was cut off from any sapping action upon it by the above restriction as to tender by weight. For the renewal of the silver coinage itself no actual measures were taken save the prohibition of the import of light coins.

For more than twenty years the defective state of the silver coin continued quite unheeded; evidently as no longer causing international embarrassment, now that its function and differentiating action upon the companion metal had been partially tied down and limited.

In 1787 the depreciation of the silver coinage was ascertained experimentally, when it was found that half-crowns were defective by over 9 per cent., shillings by over 24 per cent., and sixpences by more than 38 per cent. of their proper weight. To this depreciation was added an exterior cause of drain by the action of France, who in 1792 increased the scarcity of silver coins and bullion by the issue of her assignats. In that year not less than 2,909,000 oz. of silver were purchased with assignats and sent into France. Five years later an attempt was made to supply the deficiency of the silver coins by the issue of Spanish dollars, countermarked with the hall mark of the King's head. This was after the Bank of England had, in accordance with the minute of the Privy Council of 26th February 1797, suspended cash payments.

ENGLAND: ACT OF 1798

On the 7th of February of the following year, 1798, the subsisting Committee of Council for Coins was dissolved, and a new committee appointed to consider the state of the coins and Mint. During its deliberations, and until it established the new rule, the further coining of silver was suspended by the Act already spoken of, which (21st June 1798) revived the old law against importation of light silver. This suspension of silver coinage was simply a temporary precaution. "Whereas," says the Act, "His Majesty has appointed a committee of his Privy Council to take into consideration the state of the coins of this kingdom, and the present establishment and constitution of His Majesty's Mint, and inconvenience may arise from any coinage of silver until such regulations may be framed as shall appear necessary; and whereas from the present low price of silver bullion, owing to temporary circumstances, a small quantity of silver bullion has been brought to the Mint to be coined, and there is reason to suppose that a still further quantity may be brought, and it is therefore necessary to suspend the coining of silver for the present, be it therefore enacted that no silver bullion shall be coined at the Mint, nor shall any silver coin that may have been coined there be delivered."

There can be little doubt that this enactment was due to Lord Liverpool, and if so that it was intended as an arrest, with a particular intent or bearing; for Liverpool had formed his conception of a monetary theory as early as 1773. None the less it is quite inadmissible to state, as has been done, that this restriction, so evidently and expressly only a temporary or interim measure of self-defence, was equivalent to a placing upon the statute-book of Lord Liverpool's gold monometallical theory. There was as yet no restriction on the legal tender of silver. It was still legal tender to any amount,—it was indeed the standard coin of the realm,—only, in order to avoid the effects of depreciation, and to prevent further depreciation, it was now the law of the land that payments of silver of sums over £25 should be made by weight, and the further coinage of silver was temporarily stopped.

This was not a gold monometallic system, and the Act which established that system was passed eight years after the death of Lord Liverpool, and six years after the Bullion Report of 1810 had been printed.

ENGLAND: THE BANK RESTRICTION

Further than incidentally it is inconsistent with the design of this book to refer to the period of suspension of cash payments and the Bullion Report. These latter are banking phenomena, and will find their place in a treatise of currency in the fuller acceptance of the term, rather than in a treatise definitely restricted to the subject of the metallic currencies. The events of 1797 which led to the suspension,—the remittances to the Continent for war purposes, a failure of credit, a run on the country banks, and then upon the London banks,—had been experienced in 1793 as acutely as in 1797; and, according to the express statement of the report itself, even in the years 1796 and 1797, when the country bankers were making great demands in order to increase their deposits, the market price of gold never rose above the Mint price. These events were therefore one phase of the internal experiences of the country, and have no relation to an international outflow of gold, caused by the heightened ratio which definitely set in in 1794. On the mere ground of first principles, therefore, it is inadmissible to make argumentative use of this event, known as the Bank Restriction, for judgment and illustration in the wider question of bimetallism. Further, the argumentative use that has been made of it—viz. that if from 1773 to 1797 England had possessed a true rather than a halting bimetallic rÉgime, she would have been supplied by its means with an amount of silver that would have increased the metallic reserve and strength of the country, and enabled it to avoid suspension—is inadmissible: and the argument itself is untenable. Such bimetallic action supplying silver could only have begun to operate in 1794, three years before the suspension. It could only have operated by substituting one metal for the other, not by adding silver to gold, but by taking away higher valued gold, and furnishing lower valued silver, i.e. by actually decreasing the metallic strength and reserve of the kingdom. And, lastly, there is the peculiar fact still requiring explaining, that the years of the bank restriction, until, that is, the new Mint law of 1816, saw the heaviest export of silver probably that England has ever experienced. During the ten years, 1801-10, nearly 10 millions sterling of silver was exported from England (over 38,176,016 oz.), while the gold exports amounted only to £2,088,483, so that, of the total export, silver formed 82 per cent. (net amounts used in both cases). It is still well known to what straits this export of silver put the country. In almost every town where there was any employment of labour the tradesmen were obliged to issue token money of their own—shilling tokens, sixpenny tokens, half-crown and five-shilling promissory-notes. Every conceivable form of hand-to-mouth unauthorised currency was resorted to, in order to relieve the needs of the situation caused by the want of silver coins. And stories are still remembered of the straits to which the working classes were driven in order to make their purchases at the week end with one pound notes, for which they could get no change. The explanation of such a phenomenon can only be that the one pound notes having driven gold out of circulation, by a law which is merely another form of the bimetallic law, left only silver available for remittance to the Continent for loans and war purpose. But, whatever the explanation, the fact cuts the ground from under the argument that bimetallism would have saved England from the bank restriction. If silver had not been legal tender to any amount (up to £25 by tale, and beyond that by weight), or again if it had been protected by an agio in 1808 as it was in 1816, it could not have left the country. The straits of the poorer classes in those years of hardship were due to the existing bimetallic system, and to it must, therefore, be attributed the aggravation rather than alleviation of the bank restriction.

If anything is required to confirm such view it can be found in the very terms of that statute of 1816 (56 Geo. III. c. 68), which established the gold standard in England. They reveal the fact that the Act was not so much a philosophical or theoretical declaration of monometallism, such as might have been expected if Lord Liverpool had still lived to dictate it, but a measure for the protection of and relating almost entirely to silver.

ENGLAND: THE ACT OF 1816

"Whereas the silver coins of the realm have, by long use and other circumstances, become greatly diminished in number and deteriorated in value, so as not to be sufficient for the payments required in dealings under the value of the current gold coins, by reason whereof a great quantity of light and counterfeit silver coin and foreign coin has been introduced into circulation within this realm, and the evils resulting therefrom can only be remedied by a new coinage of silver money...."

The Act therefore prescribes the coining of silver, 11 oz. 2 dwts. fine, at a tale after the rate of 66s. per Troy pound, whether the same be coined in crowns, half-crowns, shillings, or sixpences, or pieces of a lower denomination, but to be issued to the importer of the silver, or to the public, after a rate of 62s. per pound Troy.

"And whereas at various times heretofore the coins of this realm of gold and silver have been usually a legal tender for payments to any amount, and great inconvenience has arisen from both these precious metals being concurrently the standard measure of value and equivalent of property, it is expedient that the gold coin made according to the indentures of the Mint should henceforth be the sole standard measure of value and legal tender for payment, without any limitation of amount, and that the silver coin should be a legal tender to a limited amount only, for the facility of exchange and commerce." The Act therefore prescribes the limit of 40s. for the tender of silver.

This Act was repealed, but in substance re-enacted by the Coinage Act of 1870, and is still in principle and fact the law of the land and the basis of our monometallic system.

ENGLAND: 1816-93

From the date of its enactment England has been withdrawn from that action of bimetallic law which had been her bane for centuries. The flow of gold in or out became automatic, representing the natural flow of world-balances, and therefore proving the greatest trade help and indicator; and such commercial crises as have come upon her have arisen from the peculiarly sensitive organisation of credit which distinguishes the modern system, and are to be classed with banking rather than metallic currency phenomena.

The total coinage in England from 1816 to 1875 inclusive was £234,139,886 gold and £24,663,309 silver.

Year. Coinage of Gold. Imports of Gold Bullion and Specie. Exports of Gold Bullion and Specie.
1855 9,008,663 ? 11,847,000
1856 6,002,114 ? 12,038,000
1857 485,980 ? 15,062,000
1858 1,231,023 22,793,000 12,567,000
1859 2,649,509 22,298,000 18,081,000
1860 3,121,709 12,585,000 15,642,000
1861 8,190,170 12,164,000 11,238,000
1862 7,836,413 19,904,000 16,012,000
1863 6,607,456 19,143,000 15,303,000
1864 9,535,597 16,901,000 13,280,000
1865 2,367,614 14,486,000 8,493,000
1866 5,076,676 23,510,000 12,742,000
1867 496,397 15,800,000 7,889,000
1868 1,653,384 17,136,000 12,708,000
1869 7,372,204 13,771,000 8,474,000
1870 2,313,384 18,807,000 10,014,000
1871 9,919,656 21,619,000 20,698,000
1872 15,261,442 18,469,000 19,749,000
1873 3,384,568 20,611,000 19,071,000
1874 1,461,565 18,081,000 10,642,000
1875 243,264 23,141,000 18,648,000
1876 4,696,648 23,476,000 16,516,000
1877 981,468 15,442,000 20,374,000
1878 2,265,069 20,871,000 14,969,000
1879 35,050 13,369,000 17,579,000
1880 4,150,052 9,455,000 11,829,000
1881 ... 9,963,000 15,499,000
1882 ... 14,377,000 12,024,000
1883 1,403,713 7,756,000 7,091,000
1884 2,324,015 10,744,000 12,013,000
1885 2,973,453 13,377,000 11,931,000
1886 ... 13,392,000 13,784,000
1887 1,908,686 9,955,000 9,324,000
1888 2,277,424 15,000,000 14,250,000
1889 7,257,455 17,570,000 14,000,000
1890 7,662,898 23,900,000 14,250,000
1891 6,869,119 29,500,000 25,000,000
1892 13,944,963 21,250,000 15,450,000
1893 9,318,021 23,630,000 18,800,000

Year. Coinage of Silver. Imports of Silver Bullion and Specie. Exports of Silver Bullion and Specie.
1855 195,510 ? 6,981,000
1856 462,528 ? 12,813,000
1857 373,230 ? 18,505,000
1858 445,896 6,700,000 7,062,000
1859 647,064 14,772,000 17,608,000
1860 218,403 10,394,000 9,893,000
1861 209,484 6,583,000 9,573,000
1862 148,518 11,753,000 13,314,000
1863 161,172 10,888,000 11,241,000
1864 535,194 10,827,000 9,853,000
1865 501,732 6,977,000 6,599,000
1866 493,416 10,777,000 8,897,000
1867 193,842 8,021,000 6,435,000
1868 301,356 7,716,000 7,512,000
1869 76,428 6,730,000 7,904,000
1870 336,798 10,649,000 8,906,000
1871 701,514 16,522,000 13,062,000
1872 1,243,836 11,139,000 10,587,000
1873 674 12,988,000 9,828,000
1874 890,604 12,298,000 12,212,000
1875 594,000 10,124,000 8,980,000
1876 222,354 13,578,000 12,948,000
1877 420,948 21,711,000 19,437,000
1878 613,998 11,552,000 11,718,000
1879 549,054 10,787,000 11,006,000
1880 761,508 6,799,000 7,061,000
1881 997,128 6,901,000 7,004,000
1882 209,880 9,243,000 8,965,000
1883 1,274,328 9,468,000 9,323,000
1884 658,548 9,633,000 9,986,000
1885 720,918 9,434,000 9,852,000
1886 417,384 7,472,000 7,224,000
1887 861,498 7,819,000 7,807,000
1888 755,113 6,000,000 7,500,000
1889 2,215,742 9,000,000 10,500,000
1890 1,708,415 10,300,000 10,500,000
1891 1,049,113 10,500,000 11,800,000
1892 773,353 12,375,000 14,075,000
1893 1,089,707 11,320,000 13,532,000

United States

Under British dominion the American colonies retained the silver standard, as did their mother country, with such variation of actual coins and of their tariff as the situation of the country and the immense variety of metallic values prevailing in the different colonies gave rise to. The coin most commonly current was the Spanish piece of eight, but the system of weights and measures was the English system, and reckoning was by pounds, shillings, and pence. The method by which such a composite system was regulated consisted in those coinage tariffs with which early European monetary history is so well acquainted. According to a tariff issued in 1750, the ounce of silver was declared worth 6s. 8d. the Spanish milled piece of eight was to be equal to 6s.; and "whereas there is great reason to apprehend that many and great inconveniences may arise in case any coined silver or gold or English halfpence and farthings should pass at any higher rate than in a just proportion to Spanish pieces of eight, or coined silver at the ratio aforesaid," a tariff list was appended according to which the guinea was 28s., the English crown 6s. 8d., and so on for other European coins.

In accordance with this system the earliest financial steps of the Continental Congress in 1775—its issues of bills of credit—were based upon, and the bills were declared payable in, the Spanish dollar or piece of eight, to which, on the report of a special commission, appointed on 19th April 1776, the various gold and silver coins circulating by different standards in different colonies were rated by a tariff. According to this tariff the guinea weighing 5 dwts. 8 grs. was to be equivalent to 4 2/3 dollars, and the English crown equal to 1 1/9 dollar.

Gold bullion was rated 17 dollars per oz. Troy weight; sterling silver at 1 1/9 dollar per oz.

Assuming the coins to be of full weight, the ratio here established is nearly the English ratio of 15.21. The ratio for bullion is slightly different, but hardly materially.

Six years later, at the request of a committee of Congress, the superintendent of finance, Robert Morris, submitted a scheme for a national coinage (15th January 1782). This scheme is remarkable for its clear-sightedness and grasp, as well as the testimony it bore to the European monetary system of the time. After deciding on silver as a necessary unit, the report thus proceeds:—

"The various coins which have circulated in America have undergone different changes in their value, so that there is hardly any which can be considered as a general standard unless it be Spanish dollars. These pass in Georgia at 5s., in North Carolina and New York at 8s., in Virginia and the four Eastern States at 6s., in all the other States except South Carolina at 7s. 6d., and in South Carolina at 32s. 6d."

As a common denominator, calculated from part of these figures, Morris proposed a monetary unit of 1/4-grain in fine silver, the multiples to be by the decimal system, the dollar containing 1440 units, and the Mint price of fine silver being 22,237 units per pound.

On the following 21st February 1782 Congress approved of the establishment of a Mint, and directed Morris to prepare and report a plan for conducting it.

In a concurrent paper of notes on the establishment of a money unit, and of a coinage for the United States, Jefferson proposed, in opposition to Morris's scheme, a decimal system resting on the dollar, and with a ratio of 15:1.

UNITED STATES: REPORT OF 1785

"Just principles," he says, after stating the legal ratio in the chief European countries, "will lead us to disregard legal proportions altogether, to inquire into the market price of gold in the several countries with which we shall be principally connected in commerce, and to take an average from them. Perhaps we might well safely lean to a proportion somewhat above par for gold, considering our neighbourhood and commerce with the sources of the coins, and the tendency which the high price of gold in Spain has to draw thither all that of their mines, leaving silver principally for our and other markets."

The settlement of the matter was, however, delayed, although in the course of the year Morris declared that "all our dollars are rapidly going to the enemy in exchange for light gold, which must eventually cause a considerable loss and a scarcity of silver which will be seriously felt."

In this undetermined state the matter rested till 13th May 1785, when the grand committee on the money unit made its report.

The proposed ratio was justified thus: "In France 1 grain of pure gold is counted worth 15 grs. of silver. In Spain 16 grs. of silver are exchanged for 1 of gold, and in England 15 1/5. In both England and Spain gold is the prevailing money, because silver is undervalued. In France silver prevails. Sundry advantages would arise to us from a system by which silver might become the prevailing money. This would operate as a bounty to draw it from our neighbours, by whom it is not sufficiently esteemed. Silver is not exported so easily as gold, and it is a more useful metal. Certainly our exchange should not be more than 15 grs. of silver for 1 of gold." The charge for coinage was to be 2 1/2 per cent. for gold, and slightly over 3 per cent. for silver. The unit was to be a dollar of 362 grs. of pure silver, with a multiple gold piece (5 dollars) and decimal aliquot pieces.

On the 6th July following, 1785, the Congress by vote adopted the silver dollar as the basis of the currency on a decimal system, but the resolution was not followed by the establishment of a Mint, although the States were experiencing great loss by the circulation of base copper coins made in Birmingham.

On the 8th April 1786, a report was made in triplicate by the Board of Treasury to the President of Congress, the first of the three forms of the report advocating a silver dollar of 375.64 grs. fine and a ratio of 15.256. These proposals were adopted by resolution on the 8th August following, and on the 16th October of the same year, 1786, the ordinance for the establishment of the Mint of the United States of America, and for regulating the value and alloy of coin, finally passed Congress.

In accordance with the resolutions of 8th August, the mint price of the pound Troy of gold (11 parts fine) was fixed at 209 dols. 7 dimes, 7 cents, and of silver at 13 dols. 7 dimes, 7 cents, and 7 mills.

The Mint charge here comprised is about 2 per cent. on both silver and gold, "bringing the ratio of bullion at the Mint to 15.22, a little below the ratio in the coin."

UNITED STATES: HAMILTON'S REPORT, 1791

For several years all these regulations of Congress were not put in force, and it was not until 5th May 1791 that the matter was again brought before the Senate by the report of the Secretary of the Treasury, Alexander Hamilton.

Hamilton's scheme, as contained in his most remarkable paper, was for a silver unit or dollar of 371 1/4 grs. of pure silver and a ratio of 15, and instead of the allowance of 2 per cent. for waste and coinage the principle was adopted of free coinage—of delivering at the Mint the same weight of pure metal coined as should be brought to it in bullion or foreign coin. Hamilton justifies his ratio thus: "The difference established by custom in the United States between coined gold and coined silver has been stated to be nearly 1:15.6. This, if truly the case, would imply that gold was extremely overvalued in the United States, for the highest actual proportion in any part of Europe very little, if at all, exceeds 1:15, and the average proportion throughout Europe is probably not more than 1:14.8." He also deduces his ratio of 15 as a mean between the two lately preceding issues of dollars. "Taking the rate of the late dollar of 374 grs., the proportion would be as 1:15.11. Taking the rate of the newest dollar of 374 grs., the proportion would be as 1:14.87. The mean of the two would give the proportion of 1:15 very nearly, less than the legal proportion in the coins of Great Britain, which is as 1:15.2, but somewhat more than the actual or market proportion, which is not quite 1:15." As to the express selection of one or other metal for the unit, Hamilton makes a departure which marks clearly that he was creating and not continuing a system, and that if bimetallism is a feature of modern conception that conception is due to American rather than French statesmanship:[18]—"Contrary to the ideas which have heretofore prevailed in the suggestions concerning a coinage for the United States, though not without much hesitation arising from a deference for those ideas, the secretary is, upon the whole, strongly inclined to the opinion that a preference ought to be given to neither of the metals for the monetary unit ... because this cannot be done effectually without destroying the office and character of one of them as money and reducing it to the situation of mere merchandise, which, accordingly, at different times, has been proposed from different and very reputable quarters, but which would probably be a greater evil than occasional variations in the unit, from the fluctuations in the relative value of the metals, especially if care be taken to regulate the proportion between them, with an eye to their average commercial value. To annul the use of either of the metals as money is to abridge the quantity of circulating medium."

UNITED STATES: SCHEME OF 1792

This scheme was accepted in its entirety by the Act of 2nd April 1792, with the slight change that the standard of silver was changed from 11/12 to 1 485/1664 fine. The silver dollar, therefore, weighed 416 grs. gross (371 1/4 grs. pure silver); on this basis, at a ratio of 15, the equivalent gold piece would contain 24.75 grs. (371 1/4/25 = 27 3/4). This was accordingly established as the basis of the gold eagle or ten-dollar piece, which was to contain 270 grs. gross (247.5 grs. pure gold).[19] The Act was followed by another on the 9th February 1793, for regulating the rate of foreign coins. The gold coins of Great Britain and Portugal of their then standard were made a legal tender for the payment of all debts and demands, at the rate of 100 cents for every 27 grs. of their actual weight, those of France and Spain at the rate of 100 cents for every 27 2/5 grains.

For a period the system established in 1792 went on, although the ratio established was prejudicial to gold. But, twenty years after, the natural result arrived in America, as in England, and the circulation of gold was completely extinguished in the States by the unseen withdrawal of the metal.

In obedience to a resolution of the Senate of 3rd March 1817, John Quincy Adams, Secretary of State, produced a report on weights and measures, in which he impugned the correctness of the data on which Hamilton had based his reckoning in 1791.

Two years later, 26th January 1819, a committee of the House reported an ill-considered scheme, recommending a change in the ratio in favour of gold, and the imposition of a heavy seigniorage on silver. On the 1st of March following, the House of Representatives directed the secretary to report such measures as might be expedient to procure and retain a sufficient quantity of gold and silver coin in the United States.

In this report, in referring to one feature in the previous crisis, namely, the necessity in 1814 for the suspension of specie payments, Secretary Crawford stated that, from the commencement of the war until that event of 1814, a large amount of specie was taken out of the United States by the sale of English Government bills, at a discount frequently of 15 to 20 per cent.

He concluded by suggesting a raising of the value of gold in relation to silver, 5 per cent., implying a ratio of 15.75.

In the report to the House of Representatives, dated 17th March 1832, quite a different statement was made, namely, that there was no export of gold from the United States from 1792 to 1821, and that "there were certainly no indications that gold was rated too low in our standard of 1:15 earlier than 1821, when the English demand commenced."

UNITED STATES: GOLD EXPORT OF 1820

The terms of the report of the committee on the currency, which was communicated to the House of Representatives on the 2nd February 1821, must be contrasted with this statement. "The committee are of opinion that the value of American gold compared with silver ought to be somewhat higher than by law at present established. On inquiry they find that gold coins, both foreign and of the United States, have in a great measure disappeared, and from the best calculation that can be made there is reason to apprehend they will be wholly banished from circulation, and it ought not to be a matter of surprise, under our present regulations, that this should be the case.... There have been coined at the Mint of the United States 6 millions of dollars in gold. It is doubtful whether any considerable portion of it can at this time be found within the United States.... It is ascertained that the gold coin, in an office of discount and deposit of the Bank of the United States in November 1819, amounted to 165,000 dollars and the silver coin to 118,000; that since that time the silver coin has increased to 700,000 dollars, while the gold coin has diminished to 1200 dollars, 100 only of which is American."[20]

The committee proposed a bill in the sense of their report, but for seven years—years of acute commercial crises and distress—no actual step was taken. In November of the following year the subject of the disappearance of gold from the currency was brought before the lower house of Congress by Mr. Lowndes. In December 1828, however, the Senate required the Secretary of the Treasury to ascertain the ratio and to state such alterations in the gold coins as might be necessary to conform those coins to the silver coins in their true relative value.

In his report Secretary Ingham insisted on the advantage of a single standard, but, in case of a determination to maintain both gold and silver, he proposed to approximate as near as could be to the French system by establishing a ratio of 15.625. In case of no change of the ratio he proposed to discontinue the gold coinage, whenever the premium for gold should exceed 2 per cent.

No action was taken on these reports, nor on the similar proceedings in the two following years, nor very little more on the report which in June 1832 the select committee on coins produced. Part of the instructions given to this committee were "to inquire into the expediency of making silver the only legal tender, and of coining and issuing gold coins of a fixed weight and fineness, which shall be received in payment of all debts to the United States, at such ratio as may be fixed from time to time but shall not otherwise be a legal tender."

In the House of Representatives the converse proposition of a gold standard with a restricted legal tender had been made by M. Wilde, 26th March 1832, but when the report appeared it advocated a silver standard.

UNITED STATES: THE ACT OF 1834

While Congress was thus delaying over a vital question the New York bankers, May 1834, pressed for the regulation of the gold coins, so as to retain them in the country.

Two months later, 31st July 1834, the long-sought measure passed, but in an extraordinary form. At a blow the ratio was changed from 1:15 to 1:16 (15.988), by the reduction of the weight of the fine gold in the gold coins to 23.20 Troy grains, soon afterwards, by an Act of 18th July 1837, changed to 23.22 grains, the standard being changed at the same time from 11/12 to 9/10 fine.

The motives and amount of wisdom which underlay this sudden close of a long period of agitation can be measured from Benton's own words, in his Thirty Years' View:—

"A measure of relief was now at hand, before which the machinery of distress was to balk and cease its long and cruel labours—it was the passage of the bill for equalising the value of gold and silver and legalising the tender of foreign coins of both metals. The bills were brought forward in the House by Mr. Campbell H. White of New York, and passed after an animated contest in which the chief question was as to the true relative value of the two metals, varied by some into a preference for National Bank paper; 15 5/8 was the ratio of nearly all who seemed best calculated from their pursuits to understand the subject. The thick array of speakers was on that side, and the eighteen banks of the city of New York, with Mr. Gallatin at their head, favoured that proportion. The difficulty of adjusting this value, so that neither metal should expel the other had been the stumblingblock for a great many years, and now this seemed to be as formidable as ever. Refined calculations were gone into, scientific light was sought, history was rummaged back to the times of the Roman Empire; and there seemed to be no way of getting to a concord of opinion either from the light of science, the voice of history, or the result of calculations. The author of this View had, in his speeches on the subject, taken up the question in a practical point of view, regardless of history and calculations and the opinions of bank officers; and looking to the actual and equal circulation of the two metals in different countries he saw that this equality and actuality of circulation had existed for above three hundred years in the Spanish dominions of Mexico and South America, where the proportion was 16:1. Taking his stand upon this single fact, as the practical test which solved the question, all the real friends of the gold currency soon rallied to it. Mr. White gave up the bill which he had first introduced, and adopted the Spanish ratio. Mr. Clowney of South Carolina, Mr. Gillet, and Mr. Cambreleng of New York, Mr. Ewing of Indiana, Mr. McKim of Maryland, and other speakers gave it a warm support. Mr. John Quincy Adams would vote for it, though he thought the gold was overvalued, but if found to be so the difference could be corrected hereafter. The principal speakers against it and in favour of a lower rate were Messrs. Gorham of Massachusetts, Selden of New York, Binney of Pennsylvania, and Wilde of Georgia, and eventually the bill was passed by a large majority, 145 to 35. In the Senate it had an easy passage. Messrs. Calhoun and Webster supported it, Mr. Clay opposed it; and on the final vote there were but seven negatives—Messrs. Chambers of Maryland, Clay, Knight of Rhode Island, Alexander Porter of Louisiana, Silsbee of Massachusetts, Southard of New Jersey, Sprague of Maine. The good effects of the bill were immediately seen. Gold began to flow into the country through all the channels of commerce, old chests gave up their hordes, the Mint was busy; and in a few months, as if by magic, a currency banished from the country for thirty years overspread the land and gave joy and confidence to all the pursuits of industry."

The panacea thus magnificently lauded soon proved itself worse than inefficient. The ratio was too high, and the silver dollars could not be maintained. They were unduly exported, especially between the years 1848 and 1851. And in order to retain within the country a sufficient amount of small coin the amount of silver in the small coins, from the half-dollar downwards, was reduced by an Act of 24th February 1853. It was at the same time provided that they should be coined only on Government account, and they were made legal tender only up to the sum of five-dollars.

The direction of this step will be seen at a glance—it was in the direction of the gold valuation. This is as plainly the case as it was in the Latin Union, already exemplified (p. 190). Further, it was so conceived and explicitly stated by Dunham, who piloted the bill through the House. "We have had," he said, "but a single standard for the last three or four years. That has been and now is gold. We propose to let it remain so, and to adapt silver to it, to regulate it by it." Legally, the old silver dollar was left untouched, and the gold and silver valuation was not expressly abolished. No reference whatever was made to the silver dollar in the Act, for the simple reason that for years nothing had been seen of them. They did not and could not circulate. There was plenty of gold, and the absence of silver with the change in standard therein practically implied was either unnoticed, or regarded, if at all, only with indifference.

The final step in the simplification and unification of this system was commenced in 1870, when a bill was prepared for a revised coinage law with a pure gold standard, silver being demonetised as a legal tender money. The bill did not become law till 12th April 1873. And no opposition was expressed in either the House of Representatives or the Senate to the abolition of the double standard. The silver dollars previously coined (of which, however, but few were in existence) maintained their quality as legal tender; but the coining of new dollars, whether on Government or private account, was forbidden.

UNITED STATES: THE LEGISLATION OF 1873-74

This Act was therefore simply the complement of the preceding legislation of 1853.

The completion of this system thus established was provided in section 3586 of the Revised Statutes of 1874, by which the silver coins of the United States were declared legal tender only up to five dollars, thus completing, from December 1873 onwards, the demonetisation of silver, and the establishment of gold monometallism on the English plan. As an effective scheme it meant little because of the prevalence of paper.

Within a very short time of the passing of this bill, however, began the great change in the relative value of the precious metals which has continued since. The silver-producing interest, at that moment on the eve of receiving an enormous accession of strength by the Nevada finds, made itself heard. At the same time the prospect of the resumption of cash payments brought an additional incentive and interest. A commission to investigate the question of standard was therefore appointed, 14th August 1875, and a majority of this commission recommended the establishment of the double standard. Thereupon Bland, one of the members of the commission, proposed in the House of Representatives the re-establishment of the double standard, at the old ratio of 1:15.988, with free coinage of silver.

The question of resumption was pressing near. On the 1st January 1879 the States were to return to cash payments. On what basis should that return be effected? Should the Act of 1873 be maintained, or should a return be made to the bimetallic system which had prevailed before then? The Government was of the former opinion; the majority of Congress of the latter.

The silver party, finding the measure could not be carried over the veto of the president, agreed to a compromise, under which the free coinage clause was dropped, and it was as a compromise that the Bland Act so-called, the "Act to authorise the coinage of the standard silver dollar, and to restore its legal tender character," passed on the 28th February 1878.

To the favourers of a gold system it was conceded that in the maintenance of the previous legal ratio of 15.988, the silver dollar should be reserved for Treasury reckonings, and a maximum minting limit of 4 million dollars monthly should be fixed. The bimetallists gained the fixing of a minimum limit of 2 million dollars monthly of silver coinage, and the clause enjoining the President of the United States to take steps for the meeting of an international conference.

UNITED STATES: BLAND AND SHERMAN ACTS

This scheme became law immediately, and on the 1st January 1879 the United States resumed specie payment. As far as the actual circulation of the country is concerned this return is only nominally effective. The habit of employing redeemable paper had grown too strong and continuous, and even the rule of the New York banking-houses, to employ only gold in clearing-house settlements, has been formally, though not absolutely, abolished by the Act of Congress of 12th July 1882, which provided that no national bank should be a member of a clearing-house at which gold and silver certificates were not accepted in payment of balances. The Bland Bill deceived the hope of both parties, as such a compromise might be expected to do. It remained in force, notwithstanding, till August 1890, and during the twelve years, 1878-1890, the United States coined a matter of 370 million silver dollars, employing therein 9 million kilogrammes of silver—a third of the total contemporary production.

Almost yearly, up to 1887, the repeal of the silver purchase clauses of the Bland Bill and the suspension of the silver coinage was recommended to Congress by presidential message, and in the reports of the Secretary of the Treasury.

In December 1889 President Harrison and Secretary Windam definitely proposed to cease the coining of silver, and to limit the issues of silver certificates to the value of the silver bullion as deposited, reckoning that value at its then market price. From these proposals sprang, by the same peculiar process of committee gestation which had produced the Bland Act, the compromise which passed on the 14th July 1890, under the title of the Sherman Act.

This act represents a compromise not of principles but of self-seeking interests. The main regulations of the law, which came into force on the 13th August 1890, were:—

1. The Secretary of the Treasury is to purchase silver to not more than the monthly amount of 4,500,000 oz. at the market price, so long as that price is below 129.29 cents per oz.

2, 3. To issue Treasury notes against the purchases, the said notes to be full legal tender, and capable of forming part of bank reserves.

5. Up to 1st July 1891, 2 million oz. monthly of this silver to be coined into dollars. That coinage to cease after the date specified, except so far as necessary to secure the Treasury notes. At the same time the Act declares the intention of the American Government to preserve the parity of gold and silver.

The fillip given by this legislation to the price of silver was over in a moment, and almost immediately the question recurred for pressing consideration, on the strong demand of the silver party for free coinage in place of these as yet ineffectual purchase schemes. The impotent close of the international monetary conference at Brussels, in February 1893, was followed by the Act of the Governor-General of India in Council of June 26th closing the Indian Mint to the free coinage of silver. Left practically alone in her stand in defence of silver, America, in the simple interest of her gold reserve, was obliged to abandon the field, and after a bitter fight the repeal of the clauses of the Sherman Act, which had enacted the compulsory purchase of silver, was carried in November 1893.

UNITED STATES: COINAGE 1793-1893

We are too near the event to estimate these later developments of the situation, but as yet two remarkable facts have hinged upon this report—(1) the immediate depreciation of the value of silver and the effect on the export of silver to India were not such as might a priori have been conjectured; (2) the ceasing of the silver purchase deprived the currency of the United States of its only remaining element capable of expansion, and of all the countries of the world the United States stands most in need of an expanding and expansible currency.

COINAGE OF THE MINTS OF THE UNITED STATES.[21]
Years. Gold (Dollars). Silver (Dollars). Years. Gold (Dollars). Silver (Dollars).
1793-5 71,485.00 370,683.80 1813 477,140.00 620,951.50
1796 77,960.00 77,118.50 1814 77,270.00 561,687.50
1797 128,190.00 14,550.45 1815 3,175.00 17,308.00
1798 205,610.00 330,291.00 1816 ... 28,575.75
1799 213,285.00 423,515.00 1817 ... 607,783.50
1800 317,760.00 224,296.00 1818 242,940.00 1,070,454.00
1801 422,570.00 74,758.00 1819 258,615.00 1,140,000.00
1802 423,310.00 58,343.00 1820 1,319,030.00 501,680.70
1803 258,377.50 87,118.00 1821 189,325.00 825,762.45
1804 258,642.50 100,340.50 1822 88,080.00 805,806.50
1805 170,367.50 149,388.50 1823 72,425.00 895,550.00
1806 324,505.00 471,319.00 1824 93,200.00 1,752,477.00
1807 437,495.00 597,448.75 1825 156,385.00 1,564,583.00
1808 284,665.00 684,300.00 1826 92,245.00 2,002,090.00
1809 169,375.00 707,376.00 1827 131,565.00 2,869,200.00
1810 501,435.00 638,773.50 1828 140,145.00 1,575,600.00
1811 497,905.00 608,340.00 1829 295,717.50 1,994,578.00
1812 290,435.00 814,029.50 1830 643,105.00 2,495,400.00

Years. Gold (Dollars). Silver (Dollars). Years. Gold (Dollars). Silver (Dollars).
1831 714,270.00 3,175,600.00 1863 22,445,482.00 809,267.80
1832 798,435.00 2,579,000.00 1864 20,081,415.00 609,917.10
1833 978,550.00 2,759,000.00 1865 28,295,107.50 691,005.00
1834 3,954,270.00 3,415,002.00 1866 31,435,945.00 982,409.25
1835 2,186,175.00 3,443,003.00 1867 23,828,625.00 908,876.25
1836 4,135,700.00 3,606,100.00 1868 19,371,387.50 1,074,343.00
1837 1,148,305.00 2,096,010.00 1869 17,582,987.50 1,266,143.00
1838 1,809,765.00 2,333,243.40 1870 23,198,787.50 1,378,255.50
1839 1,376,847.50 2,209,778.00 1871 21,032,685.00 3,104,038.30
1840 1,675,482.50 1,726,703.00 1872 21,812,645.00 2,504,488.50
1841 1,091,857.50 1,132,750.00 1873 57,022,747.50 4,024,747.60
1842 1,829,407.50 2,332,750.00 1874 35,254,630.00 6,851,776.70
1843 8,108,797.50 3,834,750.00 1875 32,951,940.00 15,347,893.00
1844 5,427,670.00 2,235,550.00 1876 46,579,452.50 24,503,307.50
1845 3,756,447.50 1,873,200.00 1877 43,999,864.00 28,393,045.50
1846 4,034,177.50 2,558,580.00 1878 49,786,052.00 28,518,850.00
1847 20,202,325.00 2,374,450.00 1879 39,080,080.00 27,569,776.00
1848 3,775,512.00 2,040,050.00 1880 62,308,279.00 27,411,693.75
1849 9,007,761.50 2,114,950.00 1881 96,850,890.00 27,940,163.75
1850 31,981,738.50 1,866,100.00 1882 65,887,685.00 27,973,132.00
1851 62,614,492.50 774,397.00 1883 29,241,990.00 29,246,968.45
1852 56,846,187.50 999,410.00 1884 23,991,756.50 28,534,866.15
1853 39,377,909.00 9,077,571.00 1885 27,773,012.50 28,962,176.20
1854 25,915,962.50 8,619,270.00 1886 28,945,542.00 32,086,709.90
1855 29,387,968.00 3,501,245.00 1887 23,972,383.00 35,191,081.40
1856 36,857,768.50 5,142,240.00 1888 31,380,808.00 33,025,606.45
1857 32,214,540.00 5,478,760.00 1889 21,413,931.00 35,496,683.15
1858 22,938,413.50 8,495,370.00 1890 20,467,182.50 39,202,908.20
1859 14,780,570.00 3,284,450.00 1891 29,222,005.00 27,518,856.00
1860 23,473,654.00 2,259,390.00 1892 34,787,222.50 12,641,078.00
1861 83,395,530.00 3,783,740.00 1893 56,997,020.00 8,802,797.30
1862 20,875,997.50 1,252,516.50
UNITED STATES: MOVEMENTS OF METALS, 1851-1893

IMPORT AND EXPORT OF THE PRECIOUS METALS INTO AND FROM THE UNITED STATES.
Gold and Silver.
Import (Dollars). Export (Dollars).
Yearly average, 1851-55 5,151,817 39,432,522
" 1856-60 10,385,770 59,589,841
" 1861-63 24,112,923 43,611,777
Gold.
Import (Dollars). Export (Dollars).
Yearly average, 1864-70 11,117,584 58,757,484
" 1871 6,883,561 66,686,208
" 1872 8,717,458 49,548,760
" 1873 8,682,447 44,856,715
" 1874 19,503,137 34,042,420
" 1875 13,696,793 66,980,977
" 1876 7,992,709 31,177,050
" 1877 26,246,234 26,590,374
" 1878 13,330,215 9,204,455
" 1879 5,624,948 4,587,614
" 1880 80,758,396 3,639,025
" 1881 100,031,259 2,565,132
" 1882 34,377,054 32,587,880
" 1883 17,734,149 11,600,888
" 1884 22,831,317 41,081,957
" 1885 26,691,696 8,477,892
" 1886 20,743,349 42,952,191
" 1887 42,910,601 9,701,187
" 1888 43,934,317 18,376,234
" 1889 10,284,858 59,951,685
" 1890 12,943,342 17,274,491
" 1891 45,298,928 79,187,499
" 1892 18,165,056 76,735,592
" 1893 73,280,575 80,010,633
Silver.
Import (Dollars). Export (Dollars).
Yearly average, 1864-70 5,469,798 16,818,279
" 1871 14,382,463 31,755,780
" 1872 5,026,231 30,328,774
" 1873 12,798,490 39,751,859
" 1874 8,951,769 32,587,985
" 1875 7,203,924 25,151,165
" 1876 7,943,972 25,329,252
" 1877 14,528,180 29,571,863
" 1878 16,491,099 24,535,670
" 1879 14,671,052 20,409,827
" 1880 12,275,914 13,503,894
" 1881 10,544,238 16,841,715
" 1882 8,095,336 16,829,599
" 1883 10,755,242 20,219,445
" 1884 14,594,945 26,051,326
" 1885 16,550,627 33,753,633
" 1886 17,850,307 2,954,219
" 1887 17,260,191 26,296,504
" 1888 15,403,189 28,027,949
" 1889 18,678,215 36,689,248
" 1890 21,032,984 34,873,929
" 1891 27,910,193 28,783,393
" 1892 31,450,968 37,541,301
" 1893 27,765,696 47,463,399

In 1878 the currency total of America was thus composed:—

In 1893—

Metallic.
1893. Dollars.
Gold bullion, 84,631,966
Silver bullion, 128,479,587
Gold coin, 582,366,998
Silver dollars, 419,332,777
Subsidiary silver coins, 76,267,586
1,291,078,914
Paper.
Legal tender notes (old issue), 346,681,016
Legal Tender Notes Act, 14th July 1890, 153,160,151
Gold certificates, 77,487,769
Silver certificates, 334,584,504
National Bank notes, 208,538,844
Currency certificates, 39,085,000
1,159,537,284

Of the total of silver dollars in the above, only a matter of 57,869,589 are in circulation. The balance, 361,463,188, are in the Treasury vaults.

THE NETHERLANDS IN 1816

Netherlands.

During the eighteenth century the monetary history of the Netherlands loses its central and determining importance. The details of the Mint laws, which precede the later developments of the nineteenth century, are therefore relegated to the Appendix (No. IV. Holland).

When the United Provinces of the Netherlands and Belgium were united under a single sceptre, both countries had an immense variety of coins, for formerly nearly every province claimed a right of coining money. To meet the desire for a simple and single system, a monetary law was passed in 1816 under King William I. Its object was to arrive at a currency having the old florin, called the florin of 200as, as the unit. But at the same time a gold piece of 10 florins was allowed. The florin contained 9.63 grms. of silver and the 10-florin piece 6.056 grms. of gold. The ratio was therefore 15.873, whilst in France it was 15 1/2.

Moreover, to respond to the desire of the inhabitants of Belgium, the franc was accepted in the public treasuries, but at too high a rate, viz. at 47 1/2 cents, whereas it was worth only 46.8 cents. The result was that the new 3-florin pieces on leaving the Brussels Mint went to the Lille Mint, to come back in the shape of 5-franc pieces.

The law was languidly carried out. Gold pieces were principally coined, and in proportion as gold was coined it became more and more difficult to coin silver.

In 1830 Belgium was separated from Holland, and it was not till 1844 that the recoining of the old money was seriously undertaken. The monetary law had been already altered in 1839. Side by side with the worn silver coins there were issued 5 or 10-florin gold pieces, which had been coined to the amount of 172 1/2 millions of florins. The worn and clipped silver coins not being available for international transactions, gold formed the basis of exchange. This was regulated not by the florin but by 1/10 of the 10-florin gold piece. All difficulties it was thought could be obviated by adopting a florin of exactly 10 grms. weight, corresponding to the decimal metric system, and .945 fine. As long as the gold coins remained in circulation, and they were of great use while the recoinage was going on, there was thus a bimetallism with a ratio of 1:15.504. From 1842-49 more than 85 1/4 millions of florins in nominal value were called in and were recoined in new silver pieces. The operation cost the State 8 millions of florins, 7 millions being the loss on the old coins.

Before actually commencing the recoinage, the question of standard had been carefully considered. Silver was resolved on. For more than a century and a half the florin had been the unit of all transactions. As the recoinage advanced, further attention was devoted to the necessity of instituting the single standard. By the law of 26th September 1847, the system of single silver standard was adopted. In June 1850 the gold coins were called in. A total of 50 millions, not one-third of what had been coined, was offered by the public. It was sold in 1850-51 by the Government, which thereby lost rather more than 1 million.

HOLLAND IN 1872

There is a very noticeable point connected with this reform. The law of September 1847 admitted trade coins in gold by the side of the legal silver coins and fractional money. Besides the ducats, which are still in demand from time to time, there were Guillaumes d'or, double- and half-Guillaumes. These pieces were inscribed only with the weight and fineness.

This system failed completely. Though the gold Guillaume was coined of the same weight and fineness as the old 10-florin piece, which was much in request, people would not have it. The uncertainty of its value made it unpopular. Between the years 1851 and 1853 only 10,000 Guillaumes, 10,000 half-Guillaumes, and 2636 double-Guillaumes were coined, and since 1853 not a single one has been coined.

All through the Californian and Australian gold finds and until 1872, the price of silver remained stationary for large transactions. Only in small transactions did it exhibit from time to time some slight fluctuations.

From 1847-72 everybody was invariably able to sell his silver to the Netherlands Bank at 104 fl. 65 cents.
Bank retained for recoinage, etc 1 fl. 17 cents.
105 fl. 82 cents.

which, equal to value of 1 kilogramme of silver, .945, was as by the Netherlands standard.

At Amsterdam also the price of silver did not change.

With the change in 1871 this repose was disturbed. A commission was thereupon appointed, in October 1872, to consider the situation, which reported in the following December. It proposed to prohibit the free minting of silver, and this was enacted by the law of 21st May 1873. As long as there was still a hope of Germany continuing her old system, the commission merely proposed to coin a gold piece side by side with the silver money. When, however, Germany adopted the gold standard, the commission, in its additional report of 26th June 1873, proposed to do the same by the introduction of a legal tender currency of 10- and 5-florin pieces in gold, and the withdrawal of the silver standard coins issued under the law of 1847. This measure did not meet the approval of the States-General. For the moment Holland had therefore no standard of value, the Mint being closed to silver, and gold being unrecognised. The consequent heavy fall in the exchange led to an agitation which resulted in the enactment of the law of 6th June 1875, which opened the Mint to the public for the coining of golden 10-guilder pieces of .9 fine, to be legal tender concurrently with the silver florins at the ratio of 1 to 15.625 (calculated on a quotation of 60.35 price per oz. of silver). The law was only enacted for a year, and in the following May 1876 an attempt was made to pass a bill for the introduction of an exclusive gold standard, and for the demonetisation of silver. The bill was rejected by the First Chamber, and the law of 1875 renewed for another year, and then (by the law of 9th December 1877) renewed "until otherwise determined upon by law."

The result was the permanence of the limping standard—a gold piece with free minting, side by side with silver pieces whose minting is restricted, but gold and silver pieces being alike of unlimited legal tender.

On the 28th March 1877 the States-General passed a law establishing, in the Dutch East Indies, the double standard on the same basis as in Holland, i.e. with the formal suspension of the further coinage of silver. This law was promulgated in Java on the 7th June 1877.

PORTUGAL IN 1868

Portugal.

The first law respecting gold in Portugal is dated 4th August 1688.

By that law the price to be paid in the Lisbon and Oporto Mints for a mark of gold (22 carats) was 96,000 reis (533 fr. 33 cents). This same gold was valued at 102,400 reis (568 fr. 88 cents). For a mark of silver of 11 dinheiros (i.e. 11/12 fine) the value was fixed at 6000 reis (33 fr. 33 cents), producing, when minted, 6300 reis (35 francs). The legal ratio at that date (1688) was 1:16 (for purchase price of the metal), 1:16.25 (for the Mint issue rate).

In 1747 the value of a mark of coined silver was changed, and rose from 35 francs to 41 francs 66 cents (7500 reis), an enactment which changed the ratio at a blow to 13.6.

This ratio remained until the beginning of the present century, and led in short to the expulsion of gold from the monetary circulation.

The law of the 6th March 1822 gave to a mark of coined gold a fixed value of 120 milreis (666 francs 666 cents), and the gold piece, whose value was 6400 reis (35 francs 55 cents), had a value of 41 francs 66 cents (7500 reis). This law was repealed shortly afterwards, together with those passed in the Cortes of 1820, but was restored and ratified by another law of the 24th November 1823, and by a special charter of 5th June 1824.

The preamble of the law of 1822 had declared that the equivalence of 13.5 between gold and silver was very far from expressing the proportion of their mercantile value, and that gold did not practically come into circulation on account of the legal value of such money being below its corresponding value in bullion, the legal ratio was therefore raised to 16 in 1825.

In 1835 a new law, of the 24th April, gave the coined silver mark the value of 7500 reis (41 francs 66 cents), which brought the equivalence to about 15.5, a figure which was considered the average rate of exchange of money, whether national or foreign.

On the 3rd March 1847 a new law was passed raising the value of the gold mark to 128,000 reis (711 francs 11 cents), and the gold piece, whose value had been fixed in 1822 at 41 francs 66 cents (7500 reis), rose to 44 francs 44 cents (8000 reis). After this law other legal measures were taken which established the legal ratio of 16.5.

It was these incessant alterations of ratio which led Portugal to abandon bimetallism. The preamble of the law of 1854, which instituted the gold single standard, expresses this, attesting that the circulation felt the lack of harmony and the disorder produced by alterations in the ratios, that the legal ratio being higher than the commercial ratio hampered the transmission of money and burdened all transactions.

The law was adopted unanimously by the Portuguese Chambers.

The International Conferences.

The chief feature of the modern monetary agitation—the international conferences and the attempt at international system—is due to the rapid development of bimetallic theory in France, and to the initiative of the United States, as well as to the universal or world-embracing needs of the situation, and the extension of the domain of international law or morality.

It is a mistake to suppose that this new era dates from 1871, from the change in the German monetary system and the commencement of the wide divergence between the two metals. The formation of the Latin Union was the initial step in the process, although, in a smaller sphere, German monetary history for centuries had been acquainted with Mint conventions between very divergent systems, and had shortly before furnished another illustration in the Conference of Vienna in 1857. The first widely-embracing international conference proper, however, was the outcome of an expression of opinion in the conclave of the Latin Union. It was called at the invitation of France, and met at Paris on the 17th June 1867. The States represented were Austria, Baden, Bavaria, Belgium, Denmark, Spain, the United States, France, Great Britain, Greece, Italy, the Netherlands, Portugal, Prussia, Russia, Sweden and Norway, Switzerland, Turkey, and WÜrtemberg. The eight sessions of the conference occupied till the 6th July 1867. All the states except Holland declared in favour of a gold standard. It closed without arriving at any actual or practical conclusions, but the president, De Parieu, in his concluding oration, considered himself justified in asserting that the sense of the conference was in favour of a gold monometallic standard, approximating, as near as the occasions of future Mint change in the various states would permit, to a unit based on the 5-franc piece (620 tale to a kilogramme of gold).

THE CONFERENCE OF 1868

Though without immediate practical result, the conference initiated a wide movement. In England it was followed by the appointment of a commission, 18th February 1868, "to consider and report upon the proceeding of the said international monetary conference, ... and to examine and report upon the recommendations of the conference, and their adaptability to the circumstances of the United Kingdom, and whether it would be desirable to make any and what changes in the coinage of the United Kingdom, in order to establish, either wholly or partially, such uniformity as the conference had held in contemplation."

The commission sat from the 13th March to the 8th July 1868, but closed without practical decision, in regard of the difficulties lying in the way of an international coinage. In particular, the proposition of a reduction of the pound sterling to the 25-franc piece was rejected.

In France the whole course of public opinion, both before and after the conference of 1876, and in the concluding examination of the EnquÊte of 1865-69, ran strongly in favour of gold monometallism, and the opinion has been unflinchingly held and expressed that only the breaking out of the Franco-German War prevented the adoption of that system in France and in the states of the Latin Union. It is hardly too much to say that the conclusion of the war, with the heavy war indemnity which she thereby suffered, took the initiative in monetary legislation out of the hands of France.

Along with the latest reconstruction of her hoary imperial scheme, Germany effected her great and greatly-needed monetary unification and reform. She accomplished it on the basis of the old or French ratio of 15:5, and for two years after the reception of the scheme the price of silver maintained itself moderately. On the 9th July 1873, however, she completed the system by the Legal Tender Law, which demonetised the silver currency, and gradually more than two-thirds of the total old German silver money was called in, melted into bullion, and flung on the market. Concurrently, other changes were at work on the Continent. In 1872 the Scandinavian States followed the example of Germany and adopted a gold in place of a former silver standard. By the treaty of 18th December 1872 a common system was established between Sweden, Norway, and Denmark. For Sweden the conversion of the silver currency was based on a ratio of 15.57, for Denmark 15.43, and for Norway 15.44. Three years later the Netherlands followed suit. By their law of 6th June 1875 and 10th May 1876 they adopted a gold in place of their previous silver standard at a basis ratio of 15.625.

Before the completion of these widespread changes, the great fall in the gold price of silver had begun, and the United States in her silver-producing interests, Great Britain in the interests of her Indian dependency and in those of her trade with silver-using countries, and the whole commercial world generally in the dislocation of international exchange, found themselves menaced by gravest danger.

THE DEPRECIATION OF SILVER

Before the inrush of silver to the Mint, caused by such a fall, the Latin Union first limited and then abandoned its coining of the 5-franc piece.

The fall of silver became thereby only the more acute and confirmed. By July 1876 it had sunk to 46 3/4 per oz. Apprehension was universally felt, and in both England and the United States fresh commissions were appointed to consider the question. The English commission on the depreciation of silver was appointed in March 1876, and sat from the 20th March to the 8th May, under the presidency of Mr. Goschen. The investigation turned upon the causes of the prevailing situation, without any attempt at the suggestion of a remedial positive system.

Later, in the same year (15th August), the American Congress voted the appointment of a like commission, to inquire into the causes of the depreciation of silver and into the feasibility of a reconstruction of a bimetallic system, as well as to devise a ratio and measures for the facilitation of a return to cash payments in the United States. This commission resulted in a double report, the 'majority' and the 'minority' report. The majority, comprising Messrs. Jones, Bogy, Willard, Groesbeck, and Bland, recommended the remonetisation of silver and the recourse to a fresh international conference. This latter proposition was expressed in the compromise known as the Bland Bill, the "Act to authorise the coinage of the standard silver dollar, and to restore its legal tender character, 28th February 1878." Section 2 of this law imposed it upon the President of the United States to invite the members of the Latin Union and the other interested nations to an international conference. On the invitation of France this conference met in Paris on 10th August 1878. The American delegates proposed the free coinage of silver in an international agreement and its unrestricted employ on a full equality of tender with gold. The delegates of Belgium, Switzerland, and Norway combated the proposals, and, on the part of England, Mr. Goschen declared that while the complete demonetisation of silver portended a commercial crisis to which no parallel could be found, England could consent to no serious modification of her currency system. Germany was not represented, and in her absence France adopted a waiting policy, and the conference closed with an impotent expression of opinion that, in view of the difference of opinion, it was useless to discuss an international ratio, and that, while it was necessary for the world to maintain the currency of silver, the choice and treatment of each or either metal must be left to the particular monetary situation and needs of each separate state.

It was not to be expected that so lame a conclusion could stand before the needs of the situation. On the 19th May 1879 the landed interest in Germany succeeded in driving the Chancellor of the Empire to suspend the further sale of silver. The circumstance gave fresh hope to the bimetallists, and a busy propaganda was carried on throughout Europe and the States. The renewed international conference of 1881 is to be regarded as an outcome of this movement.

THE CONFERENCE OF 1881

On the invitation of the United States and France the third international conference met in Paris on the 19th April 1881. All the European States, Canada, India, and the United States were represented.

France, through her delegates, Magnin, the president of the conference, and Henri Cernuschi, at once and boldly declared for bimetallism. The United States, Italy, Austria, the Netherlands, and British India followed suit. On behalf of their states the British and German delegates declared that no change in the currency systems of their countries could be entertained, but in case of an agreement among the chief nations certain regulations to increase the monetary employment of silver might be devised. Belgium, Switzerland, Greece, and the Scandinavian kingdoms declared against bimetallism. After a recess from the 30th June to the 19th May the conference closed on the 8th July 1881 with a nominal adjournment to the 12th April 1882, so as to give room for possible currency legislation in the meantime. On the day fixed, however, the conference, as need hardly be said, did not reassemble.

Practically, in the interval between the second and third of these international delegations, the monetary situation had not perceptibly altered. The price of silver in 1878 had been 52 9/16, in 1881 it was 51 11/16: the general level of prices had, if anything, slightly improved, while the production of silver had not materially increased (from 2,551,000 kilogrammes in 1878 to 2,593,000 kilogrammes in 1881), though that of gold had certainly decreased. The close of the conference was, however, followed by a strong bimetallic agitation in England and Germany, which found united expression in the Bimetallic Congress at Cologne in October 1882.

This congress unanimously adopted the following resolutions:—

"That in order to the establishment of a firm ratio between gold and silver, it is desirable for England and Germany—

"1. To increase the employment of silver by minting full tender silver by the side of the divisional restricted tender silver.

"2. That Germany should withdraw all gold and paper below the value of 10 marks [and replace it by silver].

"3. That Germany should sell no more silver.

"4. That the Bank of England should put in practice the clause of her charter which allowed her to employ silver as part of the bank reserve."

The conclusions of this congress had, however, no practical influence on the course of policy of either nation.

In the United States a parallel though more interested agitation was conducted, centring round the yearly proposed repeal of the compulsory minting clauses of the Bland Bill.

THE ENGLISH GOLD AND SILVER COMMISSION

In England the commercial depression, consequent upon falling prices and the dislocation of exchanges with India and the East, ran its full course, and gave fresh ground for activity to the then recently formed Bimetallic League.

In the course of 1886 silver had sunk to 42d. per oz., and when the royal commission on the depression of trade and industry closed its investigations, with the expression of a desire for an inquiry into the state of the precious metals, the British Government only too gladly acceded. On the 20th September 1886 the royal commission "to inquire into the present changes in the relative values of the precious metals" was appointed. Its final report was made in October 1888, and, as is well remembered, was of a divided nature. All the members of the commission agreed that the action of the Latin Union in 1873 broke the link between gold and silver, which had kept the price of silver, as measured by gold, constant at about the legal ratio, and thereby left silver exposed to the influence of all the factors which go to determine the price of a commodity. On the question of bimetallism, in reference to the actual and to any possible currency system, the commissioners disagreed, and made separate reports. Lord Herschell, Sir C.W. Fremantle, Sir John Lubbock, Sir Thomas Henry Farrer, J.W. Birch, and Leonard H. Courtney expressed themselves adversely.

"Though unable to recommend the adoption of what is commonly known as bimetallism, we desire it to be understood that we are quite alive to the imperfections of standards of value, which not only fluctuate but fluctuate independently of each other, and we do not shut our eyes to the possibility of future arrangements between nations which may reduce these fluctuations. One uniform standard of value for all commercial nations would, no doubt, be a great advantage. But we think that any premature and doubtful step might, in addition to its other dangers and inconveniences, prejudice and retard progress to this end.

"We think also that many of the evils and dangers which arise from the present condition of the currencies of different nations have been exaggerated, and that some of the expectations of benefit to be derived from the changes which have been proposed would, if such changes were adopted, be doomed to disappointment.

"Under these circumstances we have felt that the wiser course is to abstain from recommending any fundamental change in the system of currency under which the commerce of Great Britain has attained its present development."

From these opinions dissent was directly expressed in Part III. of the report by the remaining members—Sir Louis Malet, A.J. Balfour, Henry Chaplin, Sir D. Barbour, Sir W.H. Houldsworth, and Sir Samuel Montague.

DISSENT FROM REPORT OF COMMISSION

"We cannot doubt that if the system which prevailed before 1873 were replaced in its integrity most of the evils which we have above described would be removed; and the remedy which we have to suggest is simply the reversion to a system which existed before the changes above referred to were brought about—a system, namely, under which both metals were freely coined into legal tender money at a fixed ratio over a sufficiently large area.

"The remedy which we suggest is essentially international in its character, and its details must be settled in concert with the other powers concerned.

"It will be sufficient for us to indicate the essential features of the agreement to be arrived at, viz.:—

"1. Free coinage of both metals into legal tender money.

"2. The fixing of a ratio at which the coins of either metal shall be available for the payment of all debts at the option of the debtor.

"We submit, therefore, that the chief commercial nations of the world, such as the United States, Germany, and the states forming the Latin Union, should, in the first place, be consulted as to their readiness to join with the United Kingdom in a conference, at which India and any of the British colonies which may desire to attend shall be represented, with a view to arrive, if possible, at a common agreement on the basis above indicated."

Such a report was claimed as a victory for either side, but its doubtful tenor only confirmed the rooted suspicion of the English administration as regards any change of the currency system. And when, on the occasion of the Paris Exhibition in 1889, a free International Monetary Congress was held, as one of the numerous special congresses connected with the celebration, Great Britain was not represented among the 194 members who attended on the invitation of the organising committee. M. Magnin, governor of the Bank of France, presided at the sittings, which covered from the 11th to the 15th September. Like its predecessor, the international conference, this congress closed without direct or practical resolution. Putting out of view this congress as of a more informal nature, a period of eleven years elapsed between the still only prorogued conference of Paris of 1881 and the conference of Brussels in 1893. This—as yet the last—conference was summoned on the initiative of the United States, but from the commencement a distinct difference of tone and method made itself felt; the Government of the United States recognising that some European countries might not be willing to adopt the remedy which they would prefer, namely, "the establishment of some fixity of value between gold and silver, and the free use of silver as a coin metal, upon a ratio to gold to be fixed by an agreement between the great commercial peoples of the world." The invitation to and purpose of the conference were conveyed in quite general terms, namely thus, "For the purpose of considering what measures, if any, could be taken to increase the use of silver in the currency systems of nations."

THE BRUSSELS CONFERENCE

The invitation was accepted by all the most important states, and at the first meeting, on 26th November 1892, the delegates of twenty Governments were present, namely, Austria, Hungary, Belgium, Denmark, France, Germany, Great Britain, British India, Greece, Italy, Mexico, The Netherlands, Norway, Portugal, Roumania, Russia, Spain, Sweden, Switzerland, Turkey, and the United States.

The proceedings were opened by M. Beernaert, President of the Council and Finance Minister of Belgium. M. Montefiore Levi, senator, and delegate of Belgium, was chosen as president, and his Excellency, M. Edwin H. Terrell, Minister of the United States at Brussels, and one of the delegates of the United States, was chosen vice-president.

At the second meeting the American delegates submitted a scheme for international bimetallism, but, in conformity with the terms of the invitation, at the same time expressed a hope that the powers represented would consider and submit other plans for the enlarged use of silver. Two such proposals they themselves suggested for discussion—(1) the plan of M. Moritz Levy, proposed at the conference of 1881, and (2) the plan proposed by the late Dr. A. Soetbeer. The main design of both these proposals was to increase the use of silver, by substituting silver coins or notes based on silver, for such small gold coins and small notes based on gold as are at present in circulation.

At the same session the delegates of Germany, Austria, and Russia explained that they were instructed not to express an opinion or to vote upon any resolution. Roumania, Portugal, Turkey, and Greece not having special instructions, felt themselves compelled to take up a similar attitude. Finding that France and the States of the Latin Union were apparently more disposed to criticism of, rather than to cordial co-operation with, the objects of the conference, the delegates of the United States did not press for a resolution on the wider question of bimetallism, and the attention of the conference was accordingly fixed on the subsidiary suggestions. To these latter, as above, was added on the same day a third, made by Mr. Alfred de Rothschild, to the effect that on condition of the United States continuing her purchases of 54 million oz. of silver yearly the different European powers should combine to make certain yearly purchases, say to the extent of £5,000,000 yearly; these purchases to be continued over a period of five years, at a price not exceeding 43 pence per oz. On a rise of silver above that price the purchases for the time being to be immediately suspended.

In committee this latter proposal was thus modified—

1. The European states which agree, upon the basis of this proposal, will buy in each year 30 million oz. of silver, on condition that the United States agree to continue their present purchases, and that unlimited free coinage be maintained in British India and Mexico.

2. The proportion of the purchases to be made by each country will be determined by agreement.

3. The purchases will be made at the discretion of and in the manner preferred by each Government.

4. These amounts of silver will be devoted in each country to the monetary uses authorised by the legislation of that state, and the silver will be either coined or made the guarantee for an issue of ordinary or special notes, as Government may think fit.

5. The arrangement will be made for five years. The obligatory purchase of silver will be suspended should the metal reach in the London market a price determined by agreement between the Governments. The purchases may be renewed, if the delegates of the different countries interested should agree upon the fixing of a new limit of price. They should be renewed in any case if the price falls below the original limit.

With regard to the Soetbeer plan it was abandoned in committee, while the Levy plan was drawn up in the following terms:—

"1. The withdrawal from circulation within a period of ... of gold coins containing a weight of less than 5.806 grms. of fine gold (20-franc pieces).

"2. The withdrawal of notes of a less value than the coin of 20 francs or its equivalent, an exception being made of notes representing a deposit of silver."

The manner of adopting and recommending these schemes to the conference from the committee was peculiar. The British delegate, Sir C. Fremantle, declared that he could not entertain the "Levy" except in conjunction with the "Rothschild" scheme, and while recommending the latter to the conference for discussion, the states of the Latin Union declared that even if passed, they could not recommend the plan to their Governments.

At the fourth session M. Boissevain declared that there were insurmountable obstacles to its adoption by the Government of the Netherlands. General Strachey said that unless it received more favour than was indicated by the report, he would be unable to support it. Mr. Allard, one of the Belgian delegates, declared that it was insufficient, and Sir Rivers Wilson declared, on behalf of himself and Sir Charles Fremantle, that recognising that this want of support would prevent them from recommending the plan to their Government, they would refrain from taking part in a detailed discussion of it, although they did not consider it inconsistent with the monometallist opinions which they held. Mr. M'Creary (delegate for the United States), then stated that he did not consider M. de Rothschild's proposal, as it stood, equitable to the United States, and therefore that he would be unable to support it.

CLOSE OF THE BRUSSELS CONFERENCE

In view of the various declarations, M. de Rothschild withdrew his plan, and there was left before the conference only the Levy plan. This latter was favourably regarded, but was radically insufficient for the situation, and not considered important enough to receive really vigorous support.

The course of the conference thereupon returned to the general discussion of the bimetallic proposal of the United States. In this discussion the attitude of reserve which the French delegates had maintained was abandoned, and M. Tirard declared with the greatest clearness that he could not advise his Government to open the French Mints to the free coinage of silver, unless there was a general agreement on the part of other nations to open their Mints also. Until, therefore, there should be a decided change of opinion on the part of Great Britain, Germany, Austria, the Scandinavian States, and other monometallic states, the question of returning to the free coinage of silver must be looked upon as settled.

In view of such declarations the delegates of the United States declared that they would not press for a vote upon the question of bimetallism. And the conference closed with a formal adjournment, should the Governments approve, to the 30th May 1893.

The close of the conference was a heavy blow to the bimetallic cause, as illustrating so fully the impossibility of any arrangement. Germany, Denmark, Sweden, and Norway, declared clearly that no change would be made on the gold basis of their currency. The delegate of Austria Hungary was equally explicit in his statement that his Government had every intention of abiding by the gold standard they were in the course of adopting.

The decided lead of France was followed punctually by Switzerland, Italy, Belgium, and Greece. The Netherlands were prepared to join a bimetallic union, provided that Great Britain formed a part of it; and Spain and Mexico were willing to adopt bimetallism, or other measures which would have the effect of raising the price of silver. No declaration was made on the behalf of Russia, though one of the delegates, speaking personally, was an active supporter of the gold standard. The Roumanian Government did not consider bimetallism a practical possibility, and Turkey and Portugal expressed no opinion.

Practically, the United States stood alone in advocacy of bimetallism. In addition to this fact, the situation was rendered much more trying for her delegates by the fact that since their appointment the presidential election had placed the Democratic party in power, and great uncertainty prevailed as to the attitude and intentions of a new President and Congress. "In these circumstances it soon became evident that the delegates were anxious for an adjournment of the question to give the new Government the opportunity of expressing their views, and that the conference would adjourn without any practical result. But, nevertheless, some very important statements and declarations were elicited in the course of the debates. In the first place, in addition to the distinct declarations on the part of some of the most important European powers that they would not entertain bimetallism, the representatives of the United States announced in very clear language that at any moment their Government might be disinclined to continue their purchases of silver, and that they were determined to protect their stock of gold. The Indian delegates alluded to the possibility of their Government finding itself under the necessity of closing its Mint to the free coinage of silver."

GOLD STANDARD FOR INDIA

Already, before the calling of the Brussels Conference, it had been recognised that, in case of failure to arrive at a bimetallic agreement, it would be essential thus far to close the Indian Mint, and to attempt the establishment of a gold standard in India. This impression, together with a draft scheme for a gold currency, was conveyed in a minute of Sir David Barbour's, addressed to the Secretary of State, 21st June 1892. As the result of correspondence between the Secretary of State for India in Council and the Government of India the British Government, on the 21st October 1892, i.e. a month before the meeting of the Brussels Conference, nominated a committee to consider the proposals submitted by the Indian Government for stopping the free coinage of silver in India, with a view to the introduction of a gold standard.

The committee consisted of—The Lord High Chancellor; The Right Hon. Leonard H. Courtney, M.P.; Sir Thomas Henry Farrer, Bart.; Sir Reginald Earle Welby, G.C.B.; Arthur Godley, Esq., C.B.; Lieutenant-General Richard Strachey, C.S.I.; Bertram Wodehouse Currie, Esq.

A hope was at first expressed that the committee would be able to make its report before the meeting of the conference at Brussels. But it was not actually made until the 31st May 1893.

India.

The part which India has played in the currency history of the world has been characteristic and uniform from the first. India is, and has been, from the birth of international commerce, the receptacle or sink for the precious metals of the civilised Western world. The fact that in so being she has constituted herself the safety-valve of the world's currencies is not confined to the present day merely. It is peculiarly applicable to the present day, with our organisation of banking and credit, which has concentrated the metallic reserves in certain burning central spots, and built thereon a superstructure of credit transactions so vast and in so delicately poised a manner that any undue addition to the metallic reserve sends a shudder of excitement and speculation through the whole, inducing over-trading and over-funding, and in the end a crisis. Such is the structure of the world's commerce that India provides an outlet or drain for any sudden crisis-bringing inflow of precious metal, and preserves the equilibrium of our system. The fact is patent to-day, because the nature of our credit and banking system is understood. But in reality this function India has performed through ages.

The influence she now exerts through impact with a highly delicate credit system, she formerly exerted on a less uniform and delicate system by the rougher influence of prices generally. The gain attending the Eastern trade in the sixteenth and seventeenth centuries was not measured by modern conceptions of dividends or trading margins. To the European trader the intercourse was attended with a double gain, commercial and financial—the latter really bimetallic in nature from the higher ratio then prevailing between silver and gold in India.

To India it meant a perpetual balance of trade in her favour, if such a phrase can be used of such a situation,—a continual inflow of precious metal. Her capacity of absorption of metal seems as large and unsatisfied as ever, and, on the assumption of an unaltered situation in Europe and America, her function in the world's currency system still remains—feasible and beneficent. It is the most difficult question attending the modern currency crisis, whether such assumption of an unaltered situation is permissible.

Further than this, as a simple matter of fact, the currency difficulty with India at the present moment is purely governmental and commercial. The Indian Government has yearly to remit a very large sum to this country in discharge of its gold obligations. In 1873-74, before the great fall in silver commenced, the amount remitted was £13,285,678, which, at the rate of exchange of 1 rupee = 1s. 10.35d., meant 142,657,000 rupees. During the year 1892-3 the amount remitted was £16,532,215, which, at the average rate of exchange in that year, 1s. 2.985d., required a payment of 264,784,150 rupees. If this could have been remitted at the exchange of 1873-74, it would only have needed 177,519,200 rupees, making a difference of 87,274,950 rupees. The result of this is to turn what would be a surplus of revenue into a large deficit. At an estimated exchange of 1s. 4d. per rupee for the past year, a surplus of revenue over expenditure was shown of 1,466,000 rupees. The exchange having fallen to an average of rather less than 1s. 3d., this surplus has been converted into an estimated deficit of 10,819,000 rupees. Notwithstanding the improvement of the revenue by 16,533,000 rupees over the budget estimate, the situation at the close of 1892 was fraught with a double danger to the Indian Government. The fall of silver—which had been such that during the year exchange could scarcely be maintained at 1s. 2 5/8d. for the rupee by the refusal to sell bills in India below that rate—might still proceed. And, secondly, in case of failure attending the Brussels Conference, the United States would be inevitably driven to abandon her single-handed attempt to keep up the price of silver by her silver purchases. In that case an unexampled fall of silver might be expected. The only practical solution of the difficulty was the adoption of a gold standard for India, and in order to do so at a workable rate for the rupee it would be necessary to anticipate such further fall.

So much, in very brief, for the Government situation. For the commercial,—the harassment of trade by fluctuations of exchange, the check to investments, the handicapping of the Lancashire manufactures, and so on,—all this ground is still strewn with the dÉbris of debate and difference. As far as the currency question, pure and simple, is concerned—such, that is, as is conceived of throughout this book, viz. metallic—it is almost incapable of presentation or realisation. Through the extraordinary preference of the Indian for the precious metals as metals or as a commodity, quite apart from currency use, the ordinary action of such monetary laws as have been at work in Europe for centuries is nullified—to how great an extent it is quite impossible to estimate. The minting of silver has been such as might be expected under the conditions of free minting of a cheapening metal—i.e. it has risen on an average to the full amount of the net imports of silver. But, conversely, there has been no such reactionary influence of such mintings on the gold store of the country as would have taken place in Europe. The importations of silver have gone hand in hand with a net importation, not exportation, of gold, with no traceable evidence of bimetallic action.

The establishment of the gold standard for India is, therefore, primarily and in greatest part a governmental measure. As far as relates to such purely scientific phenomena and considerations, as have governed the European currencies for centuries, India still presents field for little or for very questionable observation.[22]

NET IMPORT OF SILVER AND MINTING OF NEW SILVER, 1870-92
Year. Net Imports (Rupees). New Coinage (Rupees).
1870-1 9,419,240 17,181,970
1871-2 65,203,160 16,903,940
1872-3 7,151,440 39,809,270
1873-4 24,958,240 23,700,070
1874-5 46,422,020 48,968,840
1875-6 15,553,550 25,502,180
1876-7 71,988,720 62,711,220
1877-8 146,763,350 161,803,260
1878-9 39,706,940 72,107,700
1879-80 78,697,420 102,569,680
1880-1 38,925,740 42,496,750
1881-2 53,790,500 21,862,740
1882-3 74,802,270 65,084,570
1883-4 64,051,510 36,634,000
1884-5 72,456,310 57,942,320
1885-6 116,066,290 102,855,660
1886-7 71,557,380 46,165,370
1887-8 92,287,500 107,884,250
1888-9 92,466,790 73,122,550
1889-90 109,378,760 85,511,580
1890-1 141,751,360 131,634,740
1891-2 90,221,840 55,539,700
1892-3 128,635,690 127,052,100
Total of 23 years 1,652,256,020 1,525,044,460

NET IMPORT AND MINTING OF GOLD
Year. Rupees. Rupees.
1875-6 15,451,310 171,500
1876-7 2,073,490 Nil
1877-8 4,681,290 156,360
1878-9 (Export of 8,961,730) 850
1879-80 17,505,040 147,300
1880-1 36,551,990 133,550
1881-2 48,439,840 339,700
1882-3 49,308,710 174,950
1883-4 54,625,050 Nil
1884-5 46,719,360 129,650
1885-6 27,629,350 225,850
1886-7 21,770,650 Nil
1887-8 29,924,810 Nil
1888-9 28,139,340 226,090
1889-90 46,153,030 230,500
1890-1 56,361,720 Nil
1891-2 24,137,920 248,010
1892-3 (Export of 28,126,830) ...

FOOTNOTES:

[15] The returns for the years 1825-29 give no separate figures for gold and for silver, but give only the total of the two together.

[16] From 1865-1878—

France minted 625,466,380 francs.
Belgium minted 350,497,720 francs.
Italy minted 359,059,820 francs.
Switzerland minted 7,978,250 francs.
1,343,000,000 francs.

[17] As far, that is, as relates to gold. So far as silver is concerned, it was practically abrogated by the clauses for the prohibition of silver coinage in 38 Geo. III. c. 59 (1798), and finally repealed by the Act of 56 Geo. III. c. 68 (1816). See postea.

[18] Professor Laughlin brings out very strongly that even in such action Hamilton shows no trace of the modern conception of bimetallism, that his report expresses an emphatic preference for gold over silver, and that his object in adopting bimetallism was, while retaining silver, to leave a door open, if possible, for the introduction of gold.—History of Bimetallism in the United States, pp. 13, 14.

[19] By the law of 1837 the alloy for both gold and silver coins was fixed at 1/10. The pure gold in the eagle, which by the Act of 1834 was fixed at 232 grs. (258 grs. gross for the piece), was thereby changed to 232.2 grs. At the same time the pure metal content of the silver dollar was maintained at 371 1/4 grs., the (gross) weight per piece being changed to 412 1/2 grs.

[20] See the case more fully established in Laughlin's Bimetallism in the United States, pp. 29, 57.

[21] Viz. of Philadelphia, New Orleans, Dahlonega, Charlotte, San Francisco, and Carson City.

[22] On the subject of the history of the Indian Currency System under the East India Co., in the eighteenth and early nineteenth centuries, see a very interesting communication made in the pages of the Nineteenth Century by Mr. H.D. Macleod (Nineteenth Century, November 1894, p. 777). The question of the system established by the Order in Council of January 1841 (authorising officers in charge of public treasuries to freely receive gold coins struck in conformity with the provisions of Act xvii. of 1835, establishing the 15-rupee pieces), which continued till its rescinding in December 1852, is discussed in the evidence of Mr. T. Comber before the Royal Commission on Gold and Silver (Second Report of the Commission on Changes in the Relative Values of the Precious Metals, 1888, p. 27). For an excellent and succinct history of the Indian currency system from the end of the 18th century, see Robert Chalmers' History of Currency and the British Colonies, p. 336.


                                                                                                                                                                                                                                                                                                           

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